Monsanto Company (NYSE:MON) shares are up almost 3% after the analysts at Jefferies upgraded the stock to ‘Buy’ from ‘Hold’ and bumped up their price target to $132 from $95 per share. The analysts think an increased takeover offer of $130 or more from Bayer is highly probable as the company tries to acquire Monsanto. Monsanto previously rejected Bayer’s $122 offer as too low, but hasn’t rejected the deal in principle. The company could be amenable to a sale if the offer were raised. There is also the possibility that Bayer might go hostile in its attempt to take over Monsanto.
Hedge funds seem to be betting on a successful deal, as the number of long hedge fund bets increased by 13 lately. MON was in 51 hedge funds’ portfolios at the end of the first quarter of 2016, compared to 38 hedge funds in our database with MON holdings at the end of the previous quarter. At the end of this article we will also compare MON to other stocks, including Syngenta AG (ADR) (NYSE:SYT), Cognizant Technology Solutions Corp (NASDAQ:CTSH), and Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) to get a better sense of its popularity.
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At the moment there are many signals market participants can use to evaluate stocks. A couple of the most under-the-radar signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outperform the S&P 500 by a very impressive amount (see the details here).
According to publicly-available hedge fund and institutional investor holdings data compiled by Insider Monkey, Larry Robbins’ Glenview Capital has the largest position in Monsanto Company (NYSE:MON), worth close to $973.2 million, comprising 7.1% of its total 13F portfolio. Coming in second is John H. Scully’s SPO Advisory Corp, with a $318.6 million position; 5.8% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism consist of Ricky Sandler’s Eminence Capital, Ken Griffin’s Citadel Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors.
As industry-wide interest jumped, key money managers have been driving this bullishness. On the next page, we are going to take a look at some funds that added Monsanto to their equity portfolio between January and March.
Thunderbird Partners, managed by David Fear, created the largest position in Monsanto Company (NYSE:MON). Thunderbird Partners had $60.5 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $57 million position during the quarter. The following funds were also among the new MON investors: Curtis Macnguyen’s Ivory Capital, Craig C. Albert’s Sheffield Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now review hedge fund activity in other stocks similar to Monsanto Company (NYSE:MON). These stocks are Syngenta AG (ADR) (NYSE:SYT), Cognizant Technology Solutions Corp (NASDAQ:CTSH), Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR), and Delta Air Lines, Inc. (NYSE:DAL). All of these stocks’ market caps match MON’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SYT | 32 | 524358 | 6 |
| CTSH | 38 | 801492 | -6 |
| PBR | 23 | 224726 | -1 |
| DAL | 97 | 6934519 | -11 |
As you can see these stocks had an average of 48 hedge funds with bullish positions and the average amount invested in these stocks was $2121 million. That figure was $2450 million in MON’s case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is the least popular one with only 23 bullish hedge fund positions. Monsanto Company (NYSE:MON) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DAL might be a better candidate to consider a long position.
Disclosure: None
