Does Diageo plc (ADR) (NYSE:DEO) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund sentiment towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.
Is Diageo plc (ADR) (NYSE:DEO) ready to rally soon? The best stock pickers are becoming less hopeful. The number of long hedge fund positions decreased by 1 in recent months. Diageo plc (ADR) (NYSE:DEO) was in 25 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with Diageo plc (ADR) (NYSE:DEO) holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Honeywell International Inc. (NYSE:HON), American International Group Inc (NYSE:AIG), and Toronto-Dominion Bank (USA) (NYSE:TD) to gather more data points.
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To most investors, hedge funds are assumed to be worthless, old financial tools of the past. While there are greater than 8000 funds trading at the moment, We hone in on the elite of this club, approximately 700 funds. These investment experts command the lion’s share of all hedge funds’ total asset base, and by tracking their first-class investments, Insider Monkey has determined a number of investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, we’re going to take a look at the key action surrounding Diageo plc (ADR) (NYSE:DEO).
What have hedge funds been doing with Diageo plc (ADR) (NYSE:DEO)?
At the end of the third quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 4% from one quarter earlier. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Stephen Mandel’s Lone Pine Capital has the number one call position in Diageo plc (ADR) (NYSE:DEO), worth close to $307.2 million, amounting to 1.3% of its total 13F portfolio. The second most bullish fund manager is Gardner Russo & Gardner, led by Tom Russo, holding a $249 million position; 2.2% of its 13F portfolio is allocated to the company. Other peers that are bullish encompass Tom Gayner’s Markel Gayner Asset Management, John Osterweis’ Osterweis Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Judging by the fact that Diageo plc (ADR) (NYSE:DEO) has witnessed a declination in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of funds who were dropping their full holdings by the end of the third quarter. Intriguingly, Michael Doheny’s Freshford Capital Management cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, worth about $16.4 million in stock, and D E Shaw was right behind this move, as the fund said goodbye to about $3.4 million worth of shares. These transactions are interesting, as aggregate hedge fund interest was cut by 1 fund by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Diageo plc (ADR) (NYSE:DEO). These stocks are Honeywell International Inc. (NYSE:HON), American International Group Inc (NYSE:AIG), Toronto-Dominion Bank (USA) (NYSE:TD), and China Petroleum & Chemical Corp (ADR) (NYSE:SNP). This group of stocks’ market values matches Diageo plc (ADR) (NYSE:DEO)’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HON | 46 | 1294250 | -3 |
| AIG | 94 | 8425524 | -5 |
| TD | 16 | 342207 | -3 |
| SNP | 7 | 21003 | -2 |
As you can see, these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $2.52 billion. That figure was $1.15 billion in Diageo plc (ADR) (NYSE:DEO)’s case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand, China Petroleum & Chemical Corp (ADR) (NYSE:SNP) is the least popular one with only 7 bullish hedge fund positions. Diageo plc (ADR) (NYSE:DEO) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, American International Group Inc (NYSE:AIG) might be a better candidate to consider a long position.
