Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Campbell Soup Company (NYSE:CPB).
Campbell Soup Company (NYSE:CPB) shareholders have witnessed an increase in support from the world’s most elite money managers lately. Our calculations also showed that CPB isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to check out the new hedge fund action regarding Campbell Soup Company (NYSE:CPB).
How are hedge funds trading Campbell Soup Company (NYSE:CPB)?
At Q3’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CPB over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Third Point was the largest shareholder of Campbell Soup Company (NYSE:CPB), with a stake worth $659.3 million reported as of the end of September. Trailing Third Point was Citadel Investment Group, which amassed a stake valued at $78.6 million. Armistice Capital, York Capital Management, and Governors Lane were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, some big names have been driving this bullishness. York Capital Management, managed by James Dinan, created the most outsized position in Campbell Soup Company (NYSE:CPB). York Capital Management had $28.5 million invested in the company at the end of the quarter. Isaac Corre’s Governors Lane also made a $20.5 million investment in the stock during the quarter. The following funds were also among the new CPB investors: Keith Meister’s Corvex Capital, Frank Brosens’s Taconic Capital, and John Petry’s Sessa Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Campbell Soup Company (NYSE:CPB) but similarly valued. We will take a look at Extra Space Storage, Inc. (NYSE:EXR), Regency Centers Corp (NYSE:REG), 58.com Inc (NYSE:WUBA), and Jacobs Engineering Group Inc (NYSE:JEC). This group of stocks’ market values are similar to CPB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EXR | 22 | 292795 | 5 |
| REG | 18 | 252505 | -4 |
| WUBA | 24 | 689789 | 2 |
| JEC | 30 | 730196 | 1 |
| Average | 23.5 | 491321 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $491.32 billion. That figure was $926 million in CPB’s case. Jacobs Engineering Group Inc (NYSE:JEC) is the most popular stock in this table. On the other hand Regency Centers Corp (NYSE:REG) is the least popular one with only 18 bullish hedge fund positions. Campbell Soup Company (NYSE:CPB) 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 JEC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
