With the latest round of 13F filings complete, we’ve run through the holdings of the more than 700 elite hedge funds and other investment firms that we track and compiled the voluminous data. We’ve already released a number of reports detailing the results, including lists of the favorite tech stocks and favorite mid-cap stocks of funds as of June 30. This time we’ll take a look at the consumer non-durables or consumer cyclical sector, which was led during the last round of filings by Kraft Foods Group Inc. (NASDAQ:KRFT), which was delisted from the NASDAQ on July 1. Therefore, while hedge funds did still have holdings in the stock as of June 30, we’ve excluded it from this list (it was beaten by the new top pick anyway, but would have ranked in the top five). Which stock takes over the top spot? Which other stocks made the list? Read on to find out.
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5. Nike Inc (NYSE:NKE)
Investors with Long Positions (as of June 30): 57
Aggregate Value of Investors’ Holdings (as of June 30): $3.41 Billion
Nike Inc (NYSE:NKE) moves into fifth place after failing to make the top five of the prior list. Hedge fund ownership was up from 56 on March 31, while holdings rose from $2.94 billion during a quarter in which shares rose by 8%. Nike’s stock has enjoyed a strong run over the past 52 weeks, with gains of 45.6%. We recently set it against rival Under Armour Inc (NYSE:UA) in a stock showdown, and declared Nike the winner, based partly on its cheaper valuation. Nike has gained about 6% since then, though admittedly Under Armour has enjoyed an even stronger run, gaining about 14%. Stephen Mandel’s Lone Pine Capital is one of the firm believers in Nike Inc (NYSE:NKE), owning 7.16 million shares. David Blood and Al Gore’s Generation Investment Management owns 1.25 million shares.
4. Pepsico Inc. (NYSE:PEP)
Investors with Long Positions (as of June 30): 57
Aggregate Value of Investors’ Holdings (as of June 30): $7.08 Billion
Pepsico Inc. (NYSE:PEP) also moves into the top five after narrowly falling short in the last rankings, despite hedge fund ownership declining from 61. The value of the smart money’s holdings also declined rather substantially from $8.02 billion, which was only slightly affected by the share price of the stock, which was down by less than 3% during the quarter. We also had Pepsi and heated rival Coca-Cola duel it out in the stock showdown arena recently, with the battle declared a draw (even though we know everyone hates ties). Pepsico Inc. (NYSE:PEP) counts Donald Yacktman and Nelson Peltz as two very bullish investors, with them holding 22.35 million shares and 18.32 million shares respectively.
3. Constellation Brands Inc. (NYSE:STZ)
Investors with Long Positions (as of June 30): 62
Aggregate Value of Investors’ Holdings (as of June 30): $4.13 Billion
Constellation Brands Inc. (NYSE:STZ) moves up from fifth on the previous list, thanks to having an additional investor and weaker competition. After a relatively flat run from early April through the end of July, shares have taken off in August, spurred by the alcohol producer’s acquisition of luxury wine brand Meiomi on August 4. Constellation Brands also expanded its board to ten members in early August, adding Frontier Communications Corp (NASDAQ:FTR) head Daniel McCarthy. Many of Constellation Brands Inc. (NYSE:STZ)’s top shareholders made only minor changes to their holdings in the second quarter, as they appear to like the long-term potential of the stock. Michael Lowenstein’s Kensico Capital was chief among them, holding 6.64 million shares worth over $770 million.
2. Coca-Cola Company (NYSE:KO)
Investors with Long Positions (as of June 30): 62
Aggregate Value of Investors’ Holdings (as of June 30): $19.54 Billion
Pepsi’s rival did indeed make the list also, with Coca-Cola Company (NYSE:KO) retaining its second-place position from the previous list, though the amount of hedge fund owners and their holdings in the stock each fell, from 65 and $21.71 billion respectively. The dip did not come from Warren Buffett, who left his monolithic stake of 400 million shares unchanged. His $15.69 billion position accounts for 80% of the holdings in the stock. The recent consolidation of Coca-Cola Company (NYSE:KO)’s bottlers should help Coca-Cola itself improve its bottom-line. In addition to Buffett, Donald Yacktman is also a big investor in Coca-Cola, having large stakes in both soft drink rivals.
1. Molson Coors Brewing Company (NYSE:TAP)
Investors with Long Positions (as of June 30): 66
Aggregate Value of Investors’ Holdings (as of June 30): $2.11 Billion
Molson Coors Brewing Company (NYSE:TAP) gets tapped by the smart money as the top consumer non-durables stock, moving up from fourth a quarter earlier. Hedge fund ownership increased by four during the quarter and though holdings were only up by about $50 million, it was during a quarter in which shares were down by 6%, so there was greater purchasing of shares than meets the eye. The alcohol-fueled love child of Canada’s Molson and the United States’ Coors in 2005, Molson Coors Brewing Company (NYSE:TAP) ranks as one of the largest breweries in the world, serving up beer to 50 countries globally. Billionaire James Dinan trimmed his stake by 14% to 3.21 million shares during the second quarter, while Eric Mandelblatt’s Soroban Capital Partners initiated a 1.71 million-share stake valued at over $119 million.
Hedge funds and other big money managers tend to have the largest amounts of their capital invested in large and mega-cap stocks like Coca-Cola Company (NYSE:KO) because these companies allow for much greater capital allocation. That’s why if we take a look at the most popular stocks among funds, we won’t find any mid- or small-cap stocks there. However, our backtests of hedge funds’ equity portfolios between 1999 and 2012 revealed that the 50 most popular stocks among hedge funds underperformed the market by seven basis points per month, showing that their most popular picks and the ones that received the bulk of their capital were not actually their best picks. On the other hand, their top small-cap picks performed considerably better, outperforming the market by 95 basis points per month. This was confirmed through backtesting and in forward tests of our small-cap strategy since August 2012. The strategy, which involves imitating the 15 most popular small-cap picks among hedge funds has provided gains of 118%, beating the broader market by over 60 percentage points through the end of July (see the details).
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