Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We 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. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about The Hershey Company (NYSE:HSY) in this article.
The Hershey Company (NYSE:HSY) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that HSY 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.
To most shareholders, hedge funds are perceived as unimportant, old financial vehicles of yesteryear. While there are over 8000 funds trading at the moment, Our experts look at the top tier of this club, around 850 funds. These investment experts preside over bulk of the hedge fund industry’s total asset base, and by following their matchless equity investments, Insider Monkey has identified numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Paul Tudor Jones of Tudor Investment Corp
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the latest hedge fund action regarding The Hershey Company (NYSE:HSY).
How are hedge funds trading The Hershey Company (NYSE:HSY)?
At the end of the fourth quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 33 hedge funds held shares or bullish call options in HSY a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of The Hershey Company (NYSE:HSY), with a stake worth $660.1 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $95 million. GLG Partners, Adage Capital Management, and Gotham Asset 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 Cognios Capital allocated the biggest weight to The Hershey Company (NYSE:HSY), around 0.9% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, earmarking 0.73 percent of its 13F equity portfolio to HSY.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Cinctive Capital Management, managed by Richard SchimeláandáLawrence Sapanski, created the most valuable position in The Hershey Company (NYSE:HSY). Cinctive Capital Management had $5.8 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $2.9 million position during the quarter. The other funds with brand new HSY positions are Ran Pang’s Quantamental Technologies, Paul Tudor Jones’s Tudor Investment Corp, and Qing Li’s Sciencast Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Hershey Company (NYSE:HSY) but similarly valued. These stocks are Yum! Brands, Inc. (NYSE:YUM), Paychex, Inc. (NASDAQ:PAYX), IHS Markit Ltd. (NYSE:INFO), and Lululemon Athletica inc. (NASDAQ:LULU). This group of stocks’ market valuations are closest to HSY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YUM | 36 | 462690 | -3 |
| PAYX | 36 | 713174 | 4 |
| INFO | 29 | 729273 | -1 |
| LULU | 47 | 1133491 | -5 |
| Average | 37 | 759657 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $760 million. That figure was $901 million in HSY’s case. Lululemon Athletica inc. (NASDAQ:LULU) is the most popular stock in this table. On the other hand IHS Markit Ltd. (NYSE:INFO) is the least popular one with only 29 bullish hedge fund positions. The Hershey Company (NYSE:HSY) is not the most popular stock in this group but hedge fund interest is still above average. 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 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. Hedge funds were also right about betting on HSY as the stock returned 1.7% during the first quarter (through March 11th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
