Do Hedge Funds Love Coca-Cola Consolidated Inc. (COKE)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Coca-Cola Consolidated Inc. (NASDAQ:COKE).

Is Coca-Cola Consolidated Inc. (NASDAQ:COKE) a healthy stock for your portfolio? The best stock pickers are turning less bullish. The number of bullish hedge fund bets fell by 2 lately. Our calculations also showed that COKE 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). COKE was in 9 hedge funds’ portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with COKE holdings at the end of the previous quarter.

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Sussman of Paloma Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the key hedge fund action surrounding Coca-Cola Consolidated Inc. (NASDAQ:COKE).

How are hedge funds trading Coca-Cola Consolidated Inc. (NASDAQ:COKE)?

At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in COKE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Marshall Wace LLP held the most valuable stake in Coca-Cola Consolidated Inc. (NASDAQ:COKE), which was worth $2.8 million at the end of the third quarter. On the second spot was GLG Partners which amassed $2.6 million worth of shares. AQR Capital Management, Winton Capital Management, and Two Sigma Advisors 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 PDT Partners allocated the biggest weight to Coca-Cola Consolidated Inc. (NASDAQ:COKE), around 0.11% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.06 percent of its 13F equity portfolio to COKE.

Seeing as Coca-Cola Consolidated Inc. (NASDAQ:COKE) has experienced bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few funds who were dropping their entire stakes heading into Q4. At the top of the heap, Donald Sussman’s Paloma Partners sold off the biggest stake of the 750 funds followed by Insider Monkey, worth close to $1.5 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $0.8 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Coca-Cola Consolidated Inc. (NASDAQ:COKE). These stocks are Principia Biopharma Inc. (NASDAQ:PRNB), Steven Madden, Ltd. (NASDAQ:SHOO), Varonis Systems Inc (NASDAQ:VRNS), and TFI International Inc. (NYSE:TFII). This group of stocks’ market values are closest to COKE’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $14 million in COKE’s case. Principia Biopharma Inc. (NASDAQ:PRNB) is the most popular stock in this table. On the other hand TFI International Inc. (NYSE:TFII) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Coca-Cola Consolidated Inc. (NASDAQ:COKE) is even less popular than TFII. Hedge funds dodged a bullet by taking a bearish stance towards COKE. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. Unfortunately COKE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); COKE investors were disappointed as the stock returned 12.8% during the second quarter (through June 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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