The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at 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. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded PepsiCo, Inc. (NYSE:PEP) and determine whether the smart money was really smart about this stock.
Is PepsiCo, Inc. (NYSE:PEP) a buy right now? The smart money was becoming less hopeful. The number of long hedge fund bets retreated by 5 lately. PepsiCo, Inc. (NYSE:PEP) was in 61 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 66. Our calculations also showed that PEP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Donald Yacktman of Yacktman Asset Management
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 key hedge fund action regarding PepsiCo, Inc. (NYSE:PEP).
Do Hedge Funds Think PEP Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 52 hedge funds with a bullish position in PEP a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Fundsmith LLP was the largest shareholder of PepsiCo, Inc. (NYSE:PEP), with a stake worth $1518 million reported as of the end of September. Trailing Fundsmith LLP was Yacktman Asset Management, which amassed a stake valued at $672.2 million. Arrowstreet Capital, Bridgewater Associates, 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 Yacktman Asset Management allocated the biggest weight to PepsiCo, Inc. (NYSE:PEP), around 6.46% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, setting aside 5.83 percent of its 13F equity portfolio to PEP.
Since PepsiCo, Inc. (NYSE:PEP) has faced a decline in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers that decided to sell off their positions entirely in the third quarter. At the top of the heap, Matthew Stadelman’s Diamond Hill Capital cut the largest investment of all the hedgies watched by Insider Monkey, comprising an estimated $541.1 million in stock. Jack Woodruff’s fund, Candlestick Capital Management, also sold off its stock, about $37 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 5 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to PepsiCo, Inc. (NYSE:PEP). These stocks are Accenture Plc (NYSE:ACN), Broadcom Inc (NASDAQ:AVGO), Costco Wholesale Corporation (NASDAQ:COST), Chevron Corporation (NYSE:CVX), AT&T Inc. (NYSE:T), AbbVie Inc (NYSE:ABBV), and Wells Fargo & Company (NYSE:WFC). This group of stocks’ market valuations are closest to PEP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACN | 56 | 4460650 | 4 |
| AVGO | 50 | 2706386 | 3 |
| COST | 55 | 4393346 | 1 |
| CVX | 51 | 4442202 | 1 |
| T | 66 | 3212098 | -2 |
| ABBV | 81 | 4140050 | -1 |
| WFC | 88 | 6188279 | -6 |
| Average | 63.9 | 4220430 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 63.9 hedge funds with bullish positions and the average amount invested in these stocks was $4220 million. That figure was $4435 million in PEP’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand Broadcom Inc (NASDAQ:AVGO) is the least popular one with only 50 bullish hedge fund positions. PepsiCo, Inc. (NYSE:PEP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PEP is 42.2. 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 PEP as the stock returned 16.1% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
