While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Campbell Soup Company (NYSE:CPB).
Campbell Soup Company (NYSE:CPB) has experienced an increase in enthusiasm from smart money in recent months. CPB was in 31 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with CPB positions at the end of the previous quarter. Our calculations also showed that CPB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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.
James Dondero of Highland Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the latest hedge fund action encompassing Campbell Soup Company (NYSE:CPB).
What does smart money think about Campbell Soup Company (NYSE:CPB)?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 29 hedge funds with a bullish position in CPB a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Third Point held the most valuable stake in Campbell Soup Company (NYSE:CPB), which was worth $797.6 million at the end of the third quarter. On the second spot was Millennium Management which amassed $34.8 million worth of shares. GLG Partners, GAMCO Investors, and MFP Investors 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 Third Point allocated the biggest weight to Campbell Soup Company (NYSE:CPB), around 9.48% of its portfolio. MFP Investors is also relatively very bullish on the stock, earmarking 1.88 percent of its 13F equity portfolio to CPB.
As one would reasonably expect, some big names have been driving this bullishness. Hudson Bay Capital Management, managed by Sander Gerber, initiated the most valuable position in Campbell Soup Company (NYSE:CPB). Hudson Bay Capital Management had $7 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $3.5 million investment in the stock during the quarter. The other funds with new positions in the stock are James Dondero’s Highland Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Campbell Soup Company (NYSE:CPB) but similarly valued. These stocks are Nomura Holdings, Inc. (NYSE:NMR), Korea Electric Power Corporation (NYSE:KEP), KB Financial Group, Inc. (NYSE:KB), and Freeport-McMoRan Inc. (NYSE:FCX). This group of stocks’ market caps are similar to CPB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NMR | 5 | 24828 | -2 |
| KEP | 6 | 43753 | -1 |
| KB | 7 | 45753 | -2 |
| FCX | 37 | 1012669 | 4 |
| Average | 13.75 | 281751 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $973 million in CPB’s case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 5 bullish hedge fund positions. Campbell Soup Company (NYSE:CPB) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately CPB wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CPB were disappointed as the stock returned 0% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
