Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we publish 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. In this article, we will take a closer look at hedge fund sentiment towards Tyson Foods, Inc. (NYSE:TSN).
Is Tyson Foods, Inc. (NYSE:TSN) going to take off soon? Investors who are in the know are getting more bullish. The number of long hedge fund positions moved up by 5 in recent months. Our calculations also showed that TSN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). TSN was in 58 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 53 hedge funds in our database with TSN positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Aaron Cowen of Suvretta Capital Management
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 analyze the recent hedge fund action encompassing Tyson Foods, Inc. (NYSE:TSN).
How have hedgies been trading Tyson Foods, Inc. (NYSE:TSN)?
At the end of the fourth quarter, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. On the other hand, there were a total of 38 hedge funds with a bullish position in TSN a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Cliff Asness’s AQR Capital Management has the number one position in Tyson Foods, Inc. (NYSE:TSN), worth close to $521.8 million, corresponding to 0.6% of its total 13F portfolio. Coming in second is Iridian Asset Management, led by David Cohen and Harold Levy, holding a $196.8 million position; 3.2% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism comprise Israel Englander’s Millennium Management, Aaron Cowen’s Suvretta Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Highline Capital Management allocated the biggest weight to Tyson Foods, Inc. (NYSE:TSN), around 7.54% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, designating 7.3 percent of its 13F equity portfolio to TSN.
As one would reasonably expect, key hedge funds were breaking ground themselves. Bristol Gate Capital Partners, managed by Peter Simmie, initiated the largest position in Tyson Foods, Inc. (NYSE:TSN). Bristol Gate Capital Partners had $44.1 million invested in the company at the end of the quarter. Jack Woodruff’s Candlestick Capital Management also initiated a $35.3 million position during the quarter. The other funds with brand new TSN positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, David Rosen’s Rubric Capital Management, and Sander Gerber’s Hudson Bay Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Tyson Foods, Inc. (NYSE:TSN) but similarly valued. We will take a look at Welltower Inc. (NYSE:WELL), O’Reilly Automotive Inc (NASDAQ:ORLY), Barrick Gold Corporation (NYSE:GOLD), and Southern Copper Corporation (NYSE:SCCO). This group of stocks’ market valuations are closest to TSN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WELL | 24 | 533196 | 7 |
| ORLY | 64 | 2318640 | 17 |
| GOLD | 51 | 1814507 | 3 |
| SCCO | 20 | 230399 | 4 |
| Average | 39.75 | 1224186 | 7.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.75 hedge funds with bullish positions and the average amount invested in these stocks was $1224 million. That figure was $2187 million in TSN’s case. O’Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 20 bullish hedge fund positions. Tyson Foods, Inc. (NYSE:TSN) 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 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 but beat the market by 1.9 percentage points. Unfortunately TSN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on TSN were disappointed as the stock returned -32.7% during the same time period 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.
