Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to General Mills, Inc. (NYSE:GIS) changed recently.
Is General Mills, Inc. (NYSE:GIS) the right investment to pursue these days? Money managers are getting less optimistic. The number of long hedge fund positions went down by 4 lately. Our calculations also showed that GIS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). GIS was in 35 hedge funds’ portfolios at the end of September. There were 39 hedge funds in our database with GIS positions at the end of the previous quarter.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s take a glance at the key hedge fund action encompassing General Mills, Inc. (NYSE:GIS).
Hedge fund activity in General Mills, Inc. (NYSE:GIS)
At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GIS over the last 17 quarters. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in General Mills, Inc. (NYSE:GIS), which was worth $302.3 million at the end of the third quarter. On the second spot was Iridian Asset Management which amassed $188.2 million worth of shares. Alkeon Capital Management, AQR 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 Harvest Capital Strategies allocated the biggest weight to General Mills, Inc. (NYSE:GIS), around 5.99% of its 13F portfolio. Iridian Asset Management is also relatively very bullish on the stock, setting aside 2.95 percent of its 13F equity portfolio to GIS.
Since General Mills, Inc. (NYSE:GIS) has faced falling interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds that slashed their full holdings in the third quarter. Interestingly, Israel Englander’s Millennium Management dropped the largest position of all the hedgies monitored by Insider Monkey, totaling an estimated $59 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund sold off about $19.9 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 4 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to General Mills, Inc. (NYSE:GIS). These stocks are Cognizant Technology Solutions Corp (NASDAQ:CTSH), eBay Inc (NASDAQ:EBAY), The Hershey Company (NYSE:HSY), and Autodesk, Inc. (NASDAQ:ADSK). This group of stocks’ market caps match GIS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTSH | 40 | 2368649 | 7 |
| EBAY | 53 | 3488246 | 6 |
| HSY | 33 | 1103825 | 6 |
| ADSK | 45 | 2728142 | -11 |
| Average | 42.75 | 2422216 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.75 hedge funds with bullish positions and the average amount invested in these stocks was $2422 million. That figure was $916 million in GIS’s case. eBay Inc (NASDAQ:EBAY) is the most popular stock in this table. On the other hand The Hershey Company (NYSE:HSY) is the least popular one with only 33 bullish hedge fund positions. General Mills, Inc. (NYSE:GIS) 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 among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on GIS, though not to the same extent, as the stock returned 40.9% in 2019 (as of 12/23) 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.
