Do Hedge Funds Love McCormick & Company, Incorporated (MKC)?

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards McCormick & Company, Incorporated (NYSE:MKC), and what that likely means for the prospects of the company and its stock.

Is McCormick & Company, Incorporated (NYSE:MKC) a bargain? The smart money is buying. The number of bullish hedge fund bets improved by 2 lately. At the end of this article we will also compare MKC to other stocks, including Vanguard Short Term Corporate Bond ETF (NASDAQ:VCSH), Enbridge Energy Partners, L.P. (NYSE:EEP), and CF Industries Holdings, Inc. (NYSE:CF) to get a better sense of its popularity.

In the eyes of most traders, hedge funds are assumed to be underperforming, outdated investment vehicles of years past. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the leaders of this club, around 700 funds. It is estimated that this group of investors orchestrate the majority of all hedge funds’ total asset base, and by watching their highest performing investments, Insider Monkey has come up with many investment strategies that have historically exceeded Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, let’s view the key action encompassing McCormick & Company, Incorporated (NYSE:MKC).

How are hedge funds trading McCormick & Company, Incorporated (NYSE:MKC)?

At the end of the third quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, an increase of 12% from one quarter earlier. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the biggest position in McCormick & Company, Incorporated (NYSE:MKC), worth approximately $32.7 million and comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Carlson Capital, run by Clint Carlson, which holds a $13.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of David Harding’s Winton Capital Management, D. E. Shaw’s D E Shaw and Mario Gabelli’s GAMCO Investors.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Carlson Capital, managed by Clint Carlson, assembled the biggest position in McCormick & Company, Incorporated (NYSE:MKC) valued at $13.2 million, as previously stated. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also made a $2.6 million investment in the stock during the quarter. The other funds with new positions in the stock are George Hall’s Clinton Group, Alec Litowitz and Ross Laser’s Magnetar Capital, and Greg Poole’s Echo Street Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to McCormick & Company, Incorporated (NYSE:MKC). These stocks are Vanguard Short Term Corporate Bond ETF (NASDAQ:VCSH), Enbridge Energy Partners, L.P. (NYSE:EEP), CF Industries Holdings, Inc. (NYSE:CF), and Discovery Communications Inc. (NASDAQ:DISCK). This group of stocks’ market caps resemble MKC’s market cap.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $580 million. That figure was $87 million in MKC’s case. CF Industries Holdings, Inc. (NYSE:CF) is the most popular stock in this table. On the other hand Vanguard Short Term Corporate Bond ETF (NASDAQ:VCSH) is the least popular one with only 4 bullish hedge fund positions. McCormick & Company, Incorporated (NYSE:MKC) 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 CF might be a better candidate to consider a long position.