Elite Investors Losing Their Taste For The Hershey Company (HSY)

It’s a little-known fact that stock performance is not evenly distributed (i.e. you don’t have a 50/50 chance of picking a market-beating stock). In fact, despite the S&P 500 gaining about 5.2% between November 1, 2014 and October 30, 2015, less than 49% of the stocks in the index beat the market during that time. In contrast, the 30 stocks from the index which were the most popular among the investors that we track returned 9.5% during that time and 63% of them beat the market. This shows that while hedge funds get a lot of flak from the mainstream media for their performance, it can be rewarding to follow their moves using the right sets of data. Even then, there is never a fool proof strategy to generating returns, as even the collective wisdom of top hedge funds gets it wrong some times, as in the case of some of their top picks from the index like Micron and Anadarko. The data though, shows that following the collective wisdom of select hedge funds can be a very wise move overall.

The Hershey Company (NYSE:HSY) investors should be aware of a decrease in activity from the world’s largest hedge funds of late, with 6 of them vacating the stock during the third quarter, in aggregate. At the end of this article we will also compare The Hershey Company to other stocks including United Continental Holdings Inc (NYSE:UAL), Brown-Forman Corporation (NYSE:BF), and Incyte Corporation (NASDAQ:INCY) to get a better sense of its popularity.

At the moment there are numerous formulas stock market investors can use to grade publicly traded companies. A duo of the best formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce the market by a healthy margin (see the details here).

With all of this in mind, let’s take a gander at the new action surrounding The Hershey Company (NYSE:HSY).

Hedge fund activity in The Hershey Company (NYSE:HSY)

Heading into Q4, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 25% fall from the previous quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or had already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies holds the most valuable position in The Hershey Company (NYSE:HSY). Renaissance Technologies has a $231.1 million position in the stock, comprising 0.6% of its 13F portfolio. The second-largest stake is held by Winton Capital Management, managed by David Harding, which holds a $50.5 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise Steve Cohen’s Point72 Asset Management, Dmitry Balyasny’s Balyasny Asset Management, and Cliff Asness’ AQR Capital Management.

Since The Hershey Company (NYSE:HSY) has witnessed falling interest from hedge fund managers, we can see that there exists a select few fund managers that elected to cut their entire stakes last quarter. It’s worth mentioning that Joel Greenblatt’s Gotham Asset Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth about $34.6 million in stock. Israel Englander’s fund, Millennium Management, also said goodbye to its stock, about $33.8 million worth. These transactions are interesting, as total hedge fund interest fell by 6 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to The Hershey Company (NYSE:HSY). We will take a look at United Continental Holdings Inc (NYSE:UAL), Brown-Forman Corporation (NYSE:BF), Incyte Corporation (NASDAQ:INCY), and Sirius XM Holdings Inc. (NASDAQ:SIRI). All of these stocks’ market caps match The Hershey Company’s market cap.

As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $2.06 billion. That figure was $457 million in The Hershey Company’s case. United Continental Holdings Inc (NYSE:UAL) is the most popular stock in this table. On the other hand Brown-Forman Corporation (NYSE:BF) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks The Hershey Company (NYSE:HSY) is even less popular than Brown-Forman, in addition to having less money invested in it than any of the other stocks, and declining sentiment on top of that. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock.