Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of The Coca-Cola Company (NYSE:KO).
The Coca-Cola Company (NYSE:KO) has experienced an increase in hedge fund interest in recent months. KO was in 55 hedge funds’ portfolios at the end of the first quarter of 2020. There were 51 hedge funds in our database with KO positions at the end of the previous quarter. Our calculations also showed that KO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are many methods investors can use to size up publicly traded companies. Two of the less utilized methods are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can trounce the broader indices by a very impressive amount (see the details here).
Donald Yacktman of Yacktman Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 go over the latest hedge fund action encompassing The Coca-Cola Company (NYSE:KO).
How are hedge funds trading The Coca-Cola Company (NYSE:KO)?
Heading into the second quarter of 2020, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the fourth quarter of 2019. On the other hand, there were a total of 48 hedge funds with a bullish position in KO a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Berkshire Hathaway, managed by Warren Buffett, holds the number one position in The Coca-Cola Company (NYSE:KO). Berkshire Hathaway has a $17.7 billion position in the stock, comprising 10.1% of its 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $433.9 million position; 1.2% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that are bullish encompass Donald Yacktman’s Yacktman Asset Management, John Overdeck and David Siegel’s Two Sigma Advisors and Rajiv Jain’s GQG Partners. In terms of the portfolio weights assigned to each position Berkshire Hathaway allocated the biggest weight to The Coca-Cola Company (NYSE:KO), around 10.08% of its 13F portfolio. Bronson Point Partners is also relatively very bullish on the stock, setting aside 6.17 percent of its 13F equity portfolio to KO.
Consequently, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in The Coca-Cola Company (NYSE:KO). Arrowstreet Capital had $433.9 million invested in the company at the end of the quarter. Rajiv Jain’s GQG Partners also made a $263.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Benjamin A. Smith’s Laurion Capital Management, and Pedro Escudero’s DPM Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Coca-Cola Company (NYSE:KO) but similarly valued. These stocks are Novartis AG (NYSE:NVS), Bank of America Corporation (NYSE:BAC), Pfizer Inc. (NYSE:PFE), and The Walt Disney Company (NYSE:DIS). This group of stocks’ market valuations match KO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVS | 30 | 2034578 | 0 |
| BAC | 95 | 21721713 | -4 |
| PFE | 67 | 3159878 | 5 |
| DIS | 102 | 4701800 | -16 |
| Average | 73.5 | 7904492 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 73.5 hedge funds with bullish positions and the average amount invested in these stocks was $7904 million. That figure was $19902 million in KO’s case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 30 bullish hedge fund positions. The Coca-Cola Company (NYSE:KO) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately KO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); KO investors were disappointed as the stock returned 1.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.
