Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Kellogg Company (NYSE:K) was in 25 hedge funds’ portfolios at the end of the third quarter of 2018. K investors should pay attention to an increase in activity from the world’s largest hedge funds of late. There were 21 hedge funds in our database with K positions at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 17.4% year to date and outperformed the market by more than 14 percentage points this year. This strategy also outperformed the market by 3 percentage points in the fourth quarter despite the market volatility (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s take a peek at the latest hedge fund action regarding Kellogg Company (NYSE:K).
Hedge fund activity in Kellogg Company (NYSE:K)
Heading into the fourth quarter of 2018, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in K heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Kellogg Company (NYSE:K) was held by Pzena Investment Management, which reported holding $69.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $68.4 million position. Other investors bullish on the company included GAMCO Investors, Two Sigma Advisors, and Adage Capital Management.
As one would reasonably expect, key money managers were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, established the most outsized position in Kellogg Company (NYSE:K). Renaissance Technologies had $19.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $18.6 million investment in the stock during the quarter. The following funds were also among the new K investors: George Soros’s Soros Fund Management, Greg Poole’s Echo Street Capital Management, and Ian Simm’s Impax Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Kellogg Company (NYSE:K) but similarly valued. We will take a look at Red Hat, Inc. (NYSE:RHT), Hilton Worldwide Holdings Inc (NYSE:HLT), Sun Life Financial Inc. (USA) (NYSE:SLF), and Xcel Energy Inc (NYSE:XEL). This group of stocks’ market valuations are similar to K’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RHT | 21 | 633851 | -8 |
| HLT | 45 | 3394338 | -10 |
| SLF | 13 | 148464 | 1 |
| XEL | 21 | 456282 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1.16 billion. That figure was $330 million in K’s case. Hilton Worldwide Holdings Inc (NYSE:HLT) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (USA) (NYSE:SLF) is the least popular one with only 13 bullish hedge fund positions. Kellogg Company (NYSE:K) 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 HLT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
