At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not McCormick & Company, Incorporated (NYSE:MKC) makes for a good investment right now.
Is McCormick & Company, Incorporated (NYSE:MKC) a first-rate investment right now? Investors who are in the know were getting less bullish. The number of long hedge fund bets were cut by 1 lately. McCormick & Company, Incorporated (NYSE:MKC) was in 35 hedge funds’ portfolios at the end of March. The all time high for this statistic is 37. Our calculations also showed that MKC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we’re going to view the key hedge fund action surrounding McCormick & Company, Incorporated (NYSE:MKC).
Do Hedge Funds Think MKC Is A Good Stock To Buy Now?
At the end of March, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MKC over the last 23 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Fundsmith LLP was the largest shareholder of McCormick & Company, Incorporated (NYSE:MKC), with a stake worth $1535.4 million reported as of the end of March. Trailing Fundsmith LLP was Two Sigma Advisors, which amassed a stake valued at $59.6 million. Select Equity Group, Renaissance Technologies, and AQR 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 Fundsmith LLP allocated the biggest weight to McCormick & Company, Incorporated (NYSE:MKC), around 4.88% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, setting aside 1.04 percent of its 13F equity portfolio to MKC.
Since McCormick & Company, Incorporated (NYSE:MKC) has faced falling interest from hedge fund managers, we can see that there was a specific group of funds that elected to cut their full holdings last quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management cut the largest position of the “upper crust” of funds watched by Insider Monkey, worth about $14.1 million in stock, and Mark Coe’s Intrinsic Edge Capital was right behind this move, as the fund said goodbye to about $10.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as McCormick & Company, Incorporated (NYSE:MKC) but similarly valued. We will take a look at PPL Corporation (NYSE:PPL), Equifax Inc. (NYSE:EFX), Cerner Corporation (NASDAQ:CERN), POSCO (NYSE:PKX), Splunk Inc (NASDAQ:SPLK), Northern Trust Corporation (NASDAQ:NTRS), and Royal Caribbean Group (NYSE:RCL). All of these stocks’ market caps are closest to MKC’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $828 million. That figure was $1970 million in MKC’s case. Royal Caribbean Group (NYSE:RCL) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 12 bullish hedge fund positions. McCormick & Company, Incorporated (NYSE:MKC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MKC is 70.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately MKC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MKC were disappointed as the stock returned -1.7% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.