We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Coca-Cola European Partners plc (NYSE:CCEP).
Coca-Cola European Partners plc (NYSE:CCEP) has seen an increase in hedge fund sentiment of late. Our calculations also showed that CCEP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a glance at the new hedge fund action encompassing Coca-Cola European Partners plc (NYSE:CCEP).
How are hedge funds trading Coca-Cola European Partners plc (NYSE:CCEP)?
At Q4’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CCEP over the last 18 quarters. 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 Coca-Cola European Partners plc (NYSE:CCEP) was held by Citadel Investment Group, which reported holding $40.6 million worth of stock at the end of September. It was followed by Millennium Management with a $38.8 million position. Other investors bullish on the company included Echo Street Capital Management, D E Shaw, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Coca-Cola European Partners plc (NYSE:CCEP), around 0.62% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, dishing out 0.58 percent of its 13F equity portfolio to CCEP.
Now, some big names were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in Coca-Cola European Partners plc (NYSE:CCEP). Marshall Wace LLP had $5.4 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $3.9 million investment in the stock during the quarter. The other funds with brand new CCEP positions are Alec Litowitz and Ross Laser’s Magnetar Capital, Bruce Kovner’s Caxton Associates LP, and Jinghua Yan’s TwinBeech Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Coca-Cola European Partners plc (NYSE:CCEP) but similarly valued. We will take a look at The Kroger Co. (NYSE:KR), Cerner Corporation (NASDAQ:CERN), Fiat Chrysler Automobiles NV (NYSE:FCAU), and Match Group, Inc. (NASDAQ:MTCH). This group of stocks’ market values are similar to CCEP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KR | 31 | 1355820 | 1 |
| CERN | 34 | 1122502 | -4 |
| FCAU | 23 | 970651 | -5 |
| MTCH | 32 | 1073084 | -12 |
| Average | 30 | 1130514 | -5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $1131 million. That figure was $222 million in CCEP’s case. Cerner Corporation (NASDAQ:CERN) is the most popular stock in this table. On the other hand Fiat Chrysler Automobiles NV (NYSE:FCAU) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Coca-Cola European Partners plc (NYSE:CCEP) is even less popular than FCAU. Hedge funds clearly dropped the ball on CCEP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on CCEP as the stock returned -9.7% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
