Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Chipotle Mexican Grill, Inc. (NYSE:CMG).
Chipotle Mexican Grill, Inc. (NYSE:CMG) was in 48 hedge funds’ portfolios at the end of December. CMG investors should be aware of an increase in activity from the world’s largest hedge funds of late. There were 43 hedge funds in our database with CMG positions at the end of the previous quarter. Our calculations also showed that CMG isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now let’s take a peek at the fresh hedge fund action encompassing Chipotle Mexican Grill, Inc. (NYSE:CMG).
What does smart money think about Chipotle Mexican Grill, Inc. (NYSE:CMG)?
Heading into the first quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in CMG a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Chipotle Mexican Grill, Inc. (NYSE:CMG), with a stake worth $1476.3 million reported as of the end of September. Trailing Renaissance Technologies was Pershing Square, which amassed a stake valued at $1443.4 million. Citadel Investment Group, D E Shaw, and Alkeon 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 Pershing Square allocated the biggest weight to Chipotle Mexican Grill, Inc. (NYSE:CMG), around 22.03% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, dishing out 5.5 percent of its 13F equity portfolio to CMG.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Candlestick Capital Management, managed by Jack Woodruff, established the most valuable position in Chipotle Mexican Grill, Inc. (NYSE:CMG). Candlestick Capital Management had $58.2 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also made a $25.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, Lee Ainslie’s Maverick Capital, and Gregg Moskowitz’s Interval Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Chipotle Mexican Grill, Inc. (NYSE:CMG) but similarly valued. These stocks are Coca-Cola European Partners plc (NYSE:CCEP), The Kroger Co. (NYSE:KR), Cerner Corporation (NASDAQ:CERN), and Fiat Chrysler Automobiles NV (NYSE:FCAU). This group of stocks’ market valuations are closest to CMG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCEP | 21 | 222283 | 4 |
| KR | 31 | 1355820 | 1 |
| CERN | 34 | 1122502 | -4 |
| FCAU | 23 | 970651 | -5 |
| Average | 27.25 | 917814 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $918 million. That figure was $3903 million in CMG’s case. Cerner Corporation (NASDAQ:CERN) is the most popular stock in this table. On the other hand Coca-Cola European Partners plc (NYSE:CCEP) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Chipotle Mexican Grill, Inc. (NYSE:CMG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th and still beat the market by 1.9 percentage points. Unfortunately CMG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CMG were disappointed as the stock returned -21.4% during the first two months of 2020 (through March 9th) 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
