The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Yum! Brands, Inc. (NYSE:YUM) from the perspective of those elite funds.
Yum! Brands, Inc. (NYSE:YUM) was in 30 hedge funds’ portfolios at the end of June. YUM shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. There were 32 hedge funds in our database with YUM positions at the end of the previous quarter. Our calculations also showed that YUM isn’t among the 30 most popular stocks among hedge funds.
According to most investors, hedge funds are perceived as underperforming, old investment tools of the past. While there are more than 8000 funds with their doors open at present, Our researchers hone in on the moguls of this group, around 750 funds. It is estimated that this group of investors command most of all hedge funds’ total capital, and by watching their top equity investments, Insider Monkey has unearthed a few investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a gander at the latest hedge fund action regarding Yum! Brands, Inc. (NYSE:YUM).
What have hedge funds been doing with Yum! Brands, Inc. (NYSE:YUM)?
At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in YUM a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Yum! Brands, Inc. (NYSE:YUM) was held by Arrowstreet Capital, which reported holding $211.3 million worth of stock at the end of March. It was followed by Two Sigma Advisors with a $206.6 million position. Other investors bullish on the company included D E Shaw, Alkeon Capital Management, and Renaissance Technologies.
Due to the fact that Yum! Brands, Inc. (NYSE:YUM) has faced falling interest from hedge fund managers, it’s easy to see that there is a sect of funds that elected to cut their entire stakes by the end of the second quarter. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management sold off the biggest position of all the hedgies tracked by Insider Monkey, worth close to $7 million in stock. Andrew Feldstein and Stephen Siderow’s fund, Blue Mountain Capital, also cut its stock, about $6.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds by the end of the second quarter.
Let’s go over hedge fund activity in other stocks similar to Yum! Brands, Inc. (NYSE:YUM). These stocks are Advanced Micro Devices, Inc. (NASDAQ:AMD), China Unicom (Hong Kong) Limited (NYSE:CHU), Valero Energy Corporation (NYSE:VLO), and Red Hat, Inc. (NYSE:RHT). This group of stocks’ market caps are similar to YUM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMD | 41 | 755780 | 4 |
| CHU | 6 | 64209 | -2 |
| VLO | 35 | 792496 | -5 |
| RHT | 61 | 6666536 | -5 |
| Average | 35.75 | 2069755 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $2070 million. That figure was $988 million in YUM’s case. Red Hat, Inc. (NYSE:RHT) is the most popular stock in this table. On the other hand China Unicom (Hong Kong) Limited (NYSE:CHU) is the least popular one with only 6 bullish hedge fund positions. Yum! Brands, Inc. (NYSE:YUM) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks (see the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on YUM, though not to the same extent, as the stock returned 2.9% during the third quarter and outperformed the market.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
