Five Consumer Stocks Hedge Funds Like This Year

As a sector, Cyclical Consumer Goods & Services is down by a little over 4% over the last 52 weeks, in sharp contrast to other industries, some of which have posted strong growth numbers. Department stores, for example, have posted gains of 42.8%, while the footwear industry is up by more than 27% during the same period. While most economies around the world seem to be struggling to post strong growth, the U.S economy is in a much better state, even though it has to bear the brunt of a strong dollar. In order to help retail investors select the right company that can profit from this macro environment and is also operationally sound, we have compiled a list of firms operating in the Cyclical Consumer Goods & Services sector in which the elite hedge funds tracked by Insider Monkey have flocked to the most.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas (see the details here).

#5 PepsiCo, Inc. (NYSE:PEP)

– Investors with Long Positions (as of December 31): 58

– Aggregate Value of Investors’ Holdings (as of December 31): $6.71 Billion

While the number of hedge funds in our database holding PepsiCo, Inc. (NYSE:PEP) in their portfolios increased by one during the final three months of 2015, the aggregate value of their investments fell slightly, by 0.4%, even though the stock price of the beverage giant saw an uptick of 6.47% during the period. PepsiCo doesn’t just have an impressive diversified business of beverages and snack food products, but increasingly, a strong focus on health and wellness products such as organic Gatorade and Mountain Dew Kickstart, in an attempt to target modern, health conscious consumers. The company has an attractive dividend yield of 3% and is expected to pay out 60% of its core 2015 earnings. Nelson Peltz‘s Trian Partners holds about 18.32 million shares of PepsiCo, Inc. (NYSE:PEP) as of December 31,  valued at $1.83 billion.

#4 Jarden Corp (NYSE:JAH)

– Investors with Long Positions (as of December 31): 60

– Aggregate Value of Investors’ Holdings (as of December 31): $2.45 Billion

Hedgies stormed into Jarden Corp (NYSE:JAH) during the fourth quarter, with the total number invested in the company surging by almost 43%. For 2015, Jarden is expected to report revenue growth on the high end of its past guidance of 3%-to-5% and also beat EPS expectations. The company combined with Newell Rubbermaid in December of last year and according to a recent Moody’s report, the merger will bolster Newell’s business, though it comes at the cost of leverage and integration challenges. Raymond James upgraded the global consumer products company to ‘Outperform’ from ‘Market Perform’ last month. Survetta Capital Management, which is led by Aaron Cowen, initiated a stake in Jarden Corp (NYSE:JAH) during the fourth trimester of some 2.49 million shares valued at $141.97 million.

#3 Kraft Heinz Co (NASDAQ:KHC)

– Investors with Long Positions (as of December 31): 60

– Aggregate Value of Investors’ Holdings (as of December 31): $26.20 Billion

During the fourth trimester, the number of investors in our system long Kraft Heinz increased by four, while their aggregate investments rose by 1.2%. After the merger of Kraft and Heinz last year, Kraft Heinz Co (NASDAQ:KHC) underwent a series of cost cuts, as is characteristic of 3G Capital, the private equity firm that arranged the transaction. In his recent investor letter, Warren Buffett defended 3G’s moves, citing that those measures have been extraordinarily successful. David Palmer, an analyst with RBC Capital Markets believes that the balance sheet of the new company is stronger than either company enjoyed pre-merger. Buffett’s holding company Berkshire Hathaway, which helped finance the merger, holds more than 325.63 million shares of Kraft Heinz Co (NASDAQ:KHC) valued at 23.69 billion.

#2 Nike Inc (NYSE:NKE)

– Investors with Long Positions (as of December 31): 63

– Aggregate Value of Investors’ Holdings (as of December 31): $4.48 Billion

During the last three months of 2015, the number of investors holding Nike Inc (NYSE:NKE) in their portfolios increased by 6.7%, with their aggregate holdings representing 2.3% of Nike’s outstanding float as of the end of December. Nike was recently in the news for severing ties with Filipino boxer Manny Pacquiao after his anti-gay comments sparked outrage. The company is aiming to increase its e-commerce sales seven-fold to $7 billion over the next five years, in order to meet its revenue goal of $50 billion in 2020. In order to accelerate its online sales, Nike Inc (NYSE:NKE) recently appointed its first Digital Officer, Adam Sussman. Alex Snow‘s Lansdowne Partners is the largest stockholder of Nike Inc (NYSE:NKE) within our database, as it owns nearly 16.46 million shares valued at $1.03 billion.

#1 Constellation Brands, Inc. (NYSE:STZ)

– Investors with Long Positions (as of December 31): 67

– Aggregate Value of Investors’ Holdings (as of December 31): $5.35 Billion

The number of investors long Constellation Brands, Inc. (NYSE:STZ) increased by three during the fourth quarter, while their aggregate investments shot up by about $484 million. In its third quarter of fiscal year 2016 ending in December, Constellation enjoyed depletion growth of more than 16%, which topped all U.S brewers, driven by Corona Extra and Modelo Especial, though nearly every one of the company’s brands delivered double digit depletion gains. Constellation Brands raised its outlook for the full 2016 fiscal year and is feverishly building a new 10 million hectoliter brewery in Mexico. The stock price of the $28.7 billion alcoholic beverage company is up by almost 26% over the last 12 months. Stephen Mandel‘s Lone Pine Capital upped its stake in Constellation Brands, Inc. (NYSE:STZ) by 15% to 5.35 million shares during the October-to-December period.

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