After a lengthy stretch of outperformance, small-cap stocks suffered from July 2015 through June 2016, as heightened global economic fears led investors to flee to the safe havens of large-cap stocks and other instruments. Those stocks outperformed small-caps by about 10 percentage points during that time, with small-cap healthcare stocks being particularly hard hit. However, the tide has since turned in a big way, as evidenced by small-caps toppling their large-cap peers by 5 percentage points in the third quarter, and by another 5 percentage points in the first seven weeks of the fourth quarter. In this article, we’ll analyze how this shift affected hedge funds’ third-quarter trading of Kraft Heinz Co (NASDAQ:KHC) and see how the stock is affected by the recent hedge fund activity.
Kraft Heinz Co (NASDAQ:KHC) has experienced a decrease in activity from the world’s largest hedge funds of late, as the stock was included in the equity portfolios of 52 investors from our database at the end of September, compared to 60 funds a quarter earlier. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as NTT Docomo Inc (ADR) (NYSE:DCM), 3M Co (NYSE:MMM), and McDonald’s Corporation (NYSE:MCD) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, we’re going to take a look at the fresh action encompassing Kraft Heinz Co (NASDAQ:KHC).
Hedge fund activity in Kraft Heinz Co (NASDAQ:KHC)
A total of 52 funds tracked by Insider Monkey were long Kraft Heinz, down by 13% from the previous quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Berkshire Hathaway, managed by Warren Buffett, holds the most valuable position in Kraft Heinz Co (NASDAQ:KHC). Berkshire Hathaway has a $29.15 billion position in the stock, comprising 22.6% of its 13F portfolio. The second most bullish fund manager is David E. Shaw’s D E Shaw, which holds a $214 million position; 0.4% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions comprise John Griffin’s Blue Ridge Capital, Bruce Kovner’s Caxton Associates LP and Eric W. Mandelblatt’s Soroban Capital Partners.
Due to the fact that Kraft Heinz Co (NASDAQ:KHC) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that elected to cut their full holdings in the third quarter. It’s worth mentioning that James Crichton’s Hitchwood Capital Management dumped the largest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $97.3 million in stock. Clint Carlson’s fund, Carlson Capital, also dumped its stock, about $23.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 8 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Kraft Heinz Co (NASDAQ:KHC). We will take a look at NTT Docomo Inc (ADR) (NYSE:DCM), 3M Co (NYSE:MMM), McDonald’s Corporation (NYSE:MCD), and GlaxoSmithKline plc (ADR) (NYSE:GSK). This group of stocks’ market values resemble KHC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DCM | 6 | 91843 | -2 |
| MMM | 40 | 539304 | 3 |
| MCD | 55 | 2771731 | -8 |
| GSK | 33 | 1094325 | 5 |
As you can see these stocks had an average of 34 investors holding bullish positions and the average amount invested in these stocks was $1.12 billion. That figure was $31.24 billion in KHC’s case. McDonald’s Corporation (NYSE:MCD) is the most popular stock in this table, while NTT Docomo Inc (ADR) (NYSE:DCM) is the least popular one with only six funds long the stock. Kraft Heinz Co (NASDAQ:KHC) 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. In this regard McDonald’s Corporation (NYSE:MCD) might be a better candidate to consider a long position.
