The government requires hedge funds and wealthy investors with over a certain portfolio size to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30. We at Insider Monkey have made an extensive database of more than 700 of those elite funds and prominent investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Tyson Foods, Inc. (NYSE:TSN) based on those filings.
Is Tyson Foods, Inc. (NYSE:TSN) an attractive investment now? The smart money is buying. The number of long hedge fund positions moved up by 8 in recent months. Our calculations also showed that TSN isn’t among the 30 most popular stocks among hedge funds. TSN was in 39 hedge funds’ portfolios at the end of September. There were 31 hedge funds in our database with TSN positions at the end of the previous quarter.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
Cliff Asness of AQR Capital Management
Let’s take a look at the latest hedge fund action surrounding Tyson Foods, Inc. (NYSE:TSN).
How are hedge funds trading Tyson Foods, Inc. (NYSE:TSN)?
At Q3’s end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 26% from the second quarter of 2018. By comparison, 35 hedge funds held shares or bullish call options in TSN heading into this year. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Tyson Foods, Inc. (NYSE:TSN), which was worth $470.1 million at the end of the third quarter. On the second spot was Iridian Asset Management which amassed $346.3 million worth of shares. Moreover, Millennium Management, Balyasny Asset Management, and Point72 Asset Management were also bullish on Tyson Foods, Inc. (NYSE:TSN), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Columbus Hill Capital Management, managed by Kevin D. Eng, initiated the most outsized position in Tyson Foods, Inc. (NYSE:TSN). Columbus Hill Capital Management had $72.6 million invested in the company at the end of the quarter. Mike Masters’s Masters Capital Management also initiated a $29.8 million position during the quarter. The other funds with brand new TSN positions are Jim Simons’s Renaissance Technologies, Jonathan Barrett and Paul Segal’s Luminus Management, and Mark Kingdon’s Kingdon Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Tyson Foods, Inc. (NYSE:TSN) but similarly valued. We will take a look at Liberty Global Plc (NASDAQ:LBTYK), IDEXX Laboratories, Inc. (NASDAQ:IDXX), CBS Corporation (NYSE:CBS), and Twitter Inc (NYSE:TWTR). This group of stocks’ market caps are similar to TSN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LBTYK | 41 | 3979823 | 1 |
| IDXX | 35 | 1184985 | 2 |
| CBS | 45 | 1341366 | 6 |
| TWTR | 42 | 1074408 | 2 |
| Average | 40.75 | 1895146 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.90 billion. That figure was $1.59 billion in TSN’s case. CBS Corporation (NYSE:CBS) is the most popular stock in this table. On the other hand IDEXX Laboratories, Inc. (NASDAQ:IDXX) is the least popular one with only 35 bullish hedge fund positions. Tyson Foods, Inc. (NYSE:TSN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CBS might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
