Did Hedge Funds Make The Right Call On Conagra Brands, Inc. (CAG)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Conagra Brands, Inc. (NYSE:CAG) based on that data and determine whether they were really smart about the stock.

Conagra Brands, Inc. (NYSE:CAG) was in 30 hedge funds’ portfolios at the end of the first quarter of 2020. CAG has experienced an increase in enthusiasm from smart money in recent months. There were 29 hedge funds in our database with CAG positions at the end of the previous quarter. Our calculations also showed that CAG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most traders, hedge funds are viewed as underperforming, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation today, We choose to focus on the bigwigs of this group, approximately 850 funds. Most estimates calculate that this group of people command the lion’s share of the smart money’s total capital, and by keeping an eye on their finest picks, Insider Monkey has come up with a few investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind we’re going to review the key hedge fund action encompassing Conagra Brands, Inc. (NYSE:CAG).

How are hedge funds trading Conagra Brands, Inc. (NYSE:CAG)?

At the end of the first quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CAG over the last 18 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, JANA Partners held the most valuable stake in Conagra Brands, Inc. (NYSE:CAG), which was worth $344.2 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $65.2 million worth of shares. GAMCO Investors, Adage Capital Management, and Citadel Investment Group 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 JANA Partners allocated the biggest weight to Conagra Brands, Inc. (NYSE:CAG), around 43.89% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, designating 1.08 percent of its 13F equity portfolio to CAG.

Consequently, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most outsized position in Conagra Brands, Inc. (NYSE:CAG). Arrowstreet Capital had $7.8 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $5 million investment in the stock during the quarter. The following funds were also among the new CAG investors: Richard Driehaus’s Driehaus Capital, Cliff Asness’s AQR Capital Management, and Renaissance Technologies.

Let’s now take a look at hedge fund activity in other stocks similar to Conagra Brands, Inc. (NYSE:CAG). We will take a look at First Republic Bank (NYSE:FRC), Altice USA, Inc. (NYSE:ATUS), Cardinal Health, Inc. (NYSE:CAH), and Campbell Soup Company (NYSE:CPB). This group of stocks’ market values are closest to CAG’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $1121 million. That figure was $538 million in CAG’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand First Republic Bank (NYSE:FRC) is the least popular one with only 28 bullish hedge fund positions. Conagra Brands, Inc. (NYSE:CAG) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on CAG, though not to the same extent, as the stock returned 20.6% during the second quarter and outperformed the market.

Disclosure: None. This article was originally published at Insider Monkey.