We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE) based on those filings.
Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE) investors should be aware of a decrease in enthusiasm from smart money of late. Our calculations also showed that COKE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Bruce Kovner of Caxton Associates LP
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. 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. Keeping this in mind let’s take a peek at the latest hedge fund action regarding Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE).
Hedge fund activity in Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE)
Heading into the first quarter of 2020, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards COKE over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GLG Partners was the largest shareholder of Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE), with a stake worth $11.7 million reported as of the end of September. Trailing GLG Partners was Two Sigma Advisors, which amassed a stake valued at $3.1 million. Winton Capital Management, PDT Partners, and Citadel Investment Group 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 Quantinno Capital allocated the biggest weight to Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE), around 0.14% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.12 percent of its 13F equity portfolio to COKE.
Due to the fact that Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of fund managers who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Renaissance Technologies dumped the biggest position of the 750 funds followed by Insider Monkey, valued at close to $1.3 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund said goodbye to about $0.8 million worth. These moves are interesting, as total hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE). We will take a look at SJW Corp. (NYSE:SJW), TowneBank (NASDAQ:TOWN), Banner Corporation (NASDAQ:BANR), and ServisFirst Bancshares, Inc. (NASDAQ:SFBS). This group of stocks’ market values resemble COKE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SJW | 11 | 145886 | -11 |
| TOWN | 6 | 51675 | -1 |
| BANR | 12 | 70714 | -3 |
| SFBS | 9 | 11317 | 1 |
| Average | 9.5 | 69898 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $27 million in COKE’s case. Banner Corporation (NASDAQ:BANR) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 6 bullish hedge fund positions. Coca-Cola Bottling Co. Consolidated (NASDAQ:COKE) 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 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately COKE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on COKE were disappointed as the stock returned -22% 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.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
