Where Do Hedge Funds Stand On Kellogg Company (K)?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Kellogg Company (NYSE:K).

Kellogg Company (NYSE:K) investors should pay attention to an increase in support from the world’s most elite money managers of late. Kellogg Company (NYSE:K) was in 35 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 39. There were 33 hedge funds in our database with K positions at the end of the second quarter. Our calculations also showed that K isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we’re going to analyze the latest hedge fund action encompassing Kellogg Company (NYSE:K).

Do Hedge Funds Think K Is A Good Stock To Buy Now?

At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in K a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of Kellogg Company (NYSE:K), with a stake worth $176.5 million reported as of the end of September. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $100.8 million. Pzena Investment Management, Millennium Management, and Junto Capital Management 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 Factorial Partners allocated the biggest weight to Kellogg Company (NYSE:K), around 1.76% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, dishing out 1.05 percent of its 13F equity portfolio to K.

As one would reasonably expect, specific money managers were breaking ground themselves. Junto Capital Management, managed by James Parsons, created the most outsized position in Kellogg Company (NYSE:K). Junto Capital Management had $20.4 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also made a $11.1 million investment in the stock during the quarter. The following funds were also among the new K investors: Alec Litowitz and Ross Laser’s Magnetar Capital, Matthew Hulsizer’s PEAK6 Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s check out hedge fund activity in other stocks similar to Kellogg Company (NYSE:K). We will take a look at Southwest Airlines Co. (NYSE:LUV), Cerner Corporation (NASDAQ:CERN), Wheaton Precious Metals Corp. (NYSE:WPM), Chewy, Inc. (NYSE:CHWY), Nokia Corporation (NYSE:NOK), GoodRx Holdings, Inc. (NASDAQ:GDRX), and Barclays PLC (NYSE:BCS). This group of stocks’ market caps are similar to K’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LUV 51 744922 -5
CERN 34 789984 -4
WPM 29 932017 8
CHWY 46 484642 2
NOK 21 173335 -5
GDRX 41 698252 41
BCS 6 34848 -2
Average 32.6 551143 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $551 million. That figure was $484 million in K’s case. Southwest Airlines Co. (NYSE:LUV) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 6 bullish hedge fund positions. Kellogg Company (NYSE:K) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for K is 66.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately K wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on K were disappointed as the stock returned -3% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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