The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought McDonald’s Corporation (NYSE:MCD) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.
Is McDonald’s Corporation (NYSE:MCD) a cheap stock to buy now? Investors who are in the know were in a pessimistic mood. The number of long hedge fund bets were cut by 8 lately. McDonald’s Corporation (NYSE:MCD) was in 58 hedge funds’ portfolios at the end of September. The all time high for this statistic is 84. Our calculations also showed that MCD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind let’s go over the fresh hedge fund action regarding McDonald’s Corporation (NYSE:MCD).
Ole Andreas Halvorsen of Viking Global
Do Hedge Funds Think MCD Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MCD over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in McDonald’s Corporation (NYSE:MCD) was held by Viking Global, which reported holding $721 million worth of stock at the end of September. It was followed by Bridgewater Associates with a $351.6 million position. Other investors bullish on the company included Citadel Investment Group, Citadel Investment Group, and Melvin Capital Management. In terms of the portfolio weights assigned to each position Kehrs Ridge Capital allocated the biggest weight to McDonald’s Corporation (NYSE:MCD), around 3.58% of its 13F portfolio. Masterton Capital Management is also relatively very bullish on the stock, dishing out 2.92 percent of its 13F equity portfolio to MCD.
Due to the fact that McDonald’s Corporation (NYSE:MCD) has witnessed falling interest from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds who were dropping their full holdings in the third quarter. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors cut the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth about $101.3 million in call options. Alexander Mitchell’s fund, Scopus Asset Management, also cut its call options, about $57.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 8 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to McDonald’s Corporation (NYSE:MCD). These stocks are Morgan Stanley (NYSE:MS), Texas Instruments Incorporated (NASDAQ:TXN), Sea Limited (NYSE:SE), Shopify Inc (NYSE:SHOP), Medtronic plc (NYSE:MDT), T-Mobile US, Inc. (NASDAQ:TMUS), and SAP SE (NYSE:SAP). This group of stocks’ market caps are closest to MCD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MS | 65 | 4990950 | -4 |
| TXN | 40 | 1938965 | -10 |
| SE | 117 | 14135309 | 13 |
| SHOP | 73 | 11451372 | -12 |
| MDT | 62 | 2278950 | -6 |
| TMUS | 89 | 6928776 | -11 |
| SAP | 15 | 1529829 | -2 |
| Average | 65.9 | 6179164 | -4.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 65.9 hedge funds with bullish positions and the average amount invested in these stocks was $6179 million. That figure was $3339 million in MCD’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 15 bullish hedge fund positions. McDonald’s Corporation (NYSE:MCD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MCD is 38.8. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on MCD as the stock returned 8.2% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.
Follow Mcdonalds Corp (NYSE:MCD)
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Disclosure: None. This article was originally published at Insider Monkey.
