Hedge Funds Are Dumping Yum China Holdings, Inc. (YUMC)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th. We at Insider Monkey have made an extensive database of more than 867 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Yum China Holdings, Inc. (NYSE:YUMC) based on those filings.

Is Yum China Holdings, Inc. (NYSE:YUMC) a healthy stock for your portfolio? Prominent investors were becoming less hopeful. The number of long hedge fund positions went down by 2 in recent months. Yum China Holdings, Inc. (NYSE:YUMC) was in 30 hedge funds’ portfolios at the end of September. The all time high for this statistic is 39. Our calculations also showed that YUMC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 32 hedge funds in our database with YUMC holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s check out the key hedge fund action regarding Yum China Holdings, Inc. (NYSE:YUMC).

Dmitry Balyasny of Balyasny Asset Management

Do Hedge Funds Think YUMC Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the second quarter of 2021. On the other hand, there were a total of 39 hedge funds with a bullish position in YUMC a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Among these funds, GuardCap Asset Management held the most valuable stake in Yum China Holdings, Inc. (NYSE:YUMC), which was worth $498.2 million at the end of the third quarter. On the second spot was Antipodes Partners which amassed $64 million worth of shares. Tremblant Capital, Bridgewater Associates, and AQR Capital Management 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 GuardCap Asset Management allocated the biggest weight to Yum China Holdings, Inc. (NYSE:YUMC), around 6.86% of its 13F portfolio. Tiger Pacific Capital is also relatively very bullish on the stock, designating 5.05 percent of its 13F equity portfolio to YUMC.

Judging by the fact that Yum China Holdings, Inc. (NYSE:YUMC) has faced falling interest from hedge fund managers, it’s safe to say that there lies a certain “tier” of funds that elected to cut their positions entirely heading into Q4. Intriguingly, Michael Gelband’s ExodusPoint Capital sold off the biggest investment of the 750 funds monitored by Insider Monkey, valued at an estimated $4.2 million in stock. Ryan Tolkin (CIO)’s fund, Schonfeld Strategic Advisors, also dumped its stock, about $3.7 million worth. These moves are interesting, as total hedge fund interest dropped by 2 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Yum China Holdings, Inc. (NYSE:YUMC) but similarly valued. These stocks are The Hartford Financial Services Group Inc (NYSE:HIG), Hess Corporation (NYSE:HES), Devon Energy Corporation (NYSE:DVN), ZoomInfo Technologies Inc. (NASDAQ:ZI), Caesars Entertainment Inc. (NASDAQ:CZR), Credit Suisse Group AG (NYSE:CS), and Rogers Communications Inc. (NYSE:RCI). This group of stocks’ market valuations match YUMC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.4 hedge funds with bullish positions and the average amount invested in these stocks was $1051 million. That figure was $833 million in YUMC’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Credit Suisse Group AG (NYSE:CS) is the least popular one with only 8 bullish hedge fund positions. Yum China Holdings, Inc. (NYSE:YUMC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for YUMC is 45.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately YUMC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); YUMC investors were disappointed as the stock returned -13.6% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.