Were Hedge Funds Right About Warming Up To Restaurant Brands International Inc (QSR)?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 823 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Restaurant Brands International Inc (NYSE:QSR).

Restaurant Brands International Inc (NYSE:QSR) shareholders have witnessed an increase in enthusiasm from smart money recently. Restaurant Brands International Inc (NYSE:QSR) was in 44 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 59. There were 41 hedge funds in our database with QSR positions at the end of the first quarter. Our calculations also showed that QSR isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s take a glance at the fresh hedge fund action regarding Restaurant Brands International Inc (NYSE:QSR).

What does smart money think about Restaurant Brands International Inc (NYSE:QSR)?

Heading into the third quarter of 2020, a total of 44 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in QSR over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Among these funds, Pershing Square held the most valuable stake in Restaurant Brands International Inc (NYSE:QSR), which was worth $1372.3 million at the end of the third quarter. On the second spot was Pelham Capital which amassed $241.5 million worth of shares. D E Shaw, Tremblant Capital, and Eminence Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Pelham Capital allocated the biggest weight to Restaurant Brands International Inc (NYSE:QSR), around 25.19% of its 13F portfolio. Pershing Square is also relatively very bullish on the stock, setting aside 17.7 percent of its 13F equity portfolio to QSR.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Pelham Capital, managed by Ross Turner, initiated the most outsized position in Restaurant Brands International Inc (NYSE:QSR). Pelham Capital had $241.5 million invested in the company at the end of the quarter. David Thomas’s Atalan Capital also made a $91.5 million investment in the stock during the quarter. The following funds were also among the new QSR investors: David Cohen and Harold Levy’s Iridian Asset Management, Alexander Mitchell’s Scopus Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s go over hedge fund activity in other stocks similar to Restaurant Brands International Inc (NYSE:QSR). We will take a look at Yandex NV (NASDAQ:YNDX), Peloton Interactive, Inc. (NASDAQ:PTON), CGI Inc. (NYSE:GIB), Fox Corporation (NASDAQ:FOX), Fox Corporation (NASDAQ:FOXA), Maxim Integrated Products Inc. (NASDAQ:MXIM), and Laboratory Corp. of America Holdings (NYSE:LH). This group of stocks’ market valuations match QSR’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.1 hedge funds with bullish positions and the average amount invested in these stocks was $1122 million. That figure was $2868 million in QSR’s case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 19 bullish hedge fund positions. Restaurant Brands International Inc (NYSE:QSR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for QSR is 68.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately QSR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on QSR were disappointed as the stock returned 4.9% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.