Hedge Funds Are Selling McDonald’s Corporation (MCD)

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 have processed the filings of the more than 867 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30th holdings, data that is available nowhere else. Should you consider McDonald’s Corporation (NYSE:MCD) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

McDonald’s Corporation (NYSE:MCD) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. McDonald’s Corporation (NYSE:MCD) was in 58 hedge funds’ portfolios at the end of September. The all time high for this statistic is 84. Our calculations also showed that MCD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 we’re going to take a look at the fresh hedge fund action surrounding McDonald’s Corporation (NYSE:MCD).

Andreas Halvorsen of Viking Global

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

At the end of September, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the previous quarter. By comparison, 65 hedge funds held shares or bullish call options in MCD a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

More specifically, Viking Global was the largest shareholder of McDonald’s Corporation (NYSE:MCD), with a stake worth $721 million reported as of the end of September. Trailing Viking Global was Bridgewater Associates, which amassed a stake valued at $351.6 million. Citadel Investment Group, Citadel Investment Group, and Melvin 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 Kehrs Ridge Capital allocated the biggest weight to McDonald’s Corporation (NYSE:MCD), around 3.58% of its 13F portfolio. Masterton Capital Management is also relatively very bullish on the stock, setting aside 2.92 percent of its 13F equity portfolio to MCD.

Judging by the fact that McDonald’s Corporation (NYSE:MCD) has witnessed declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of funds who sold off their entire stakes by the end of the third quarter. It’s worth mentioning that John Overdeck and David Siegel’s Two Sigma Advisors cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising an estimated $101.3 million in call options, and Alexander Mitchell’s Scopus Asset Management was right behind this move, as the fund sold off about $57.7 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 8 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to McDonald’s Corporation (NYSE:MCD). These stocks are Morgan Stanley (NYSE:MS), Texas Instruments Incorporated (NASDAQ:TXN), Sea Limited (NYSE:SE), Shopify Inc (NYSE:SHOP), Medtronic plc (NYSE:MDT), T-Mobile US, Inc. (NASDAQ:TMUS), and SAP SE (NYSE:SAP). All of these stocks’ market caps are similar to MCD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 65.9 hedge funds with bullish positions and the average amount invested in these stocks was $6179 million. That figure was $3339 million in MCD’s case. Sea Limited (NYSE:SE) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 15 bullish hedge fund positions. McDonald’s Corporation (NYSE:MCD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MCD is 38.8. 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 MCD wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MCD investors were disappointed as the stock returned 2% 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.