In this article we will take a look at whether hedge funds think PepsiCo, Inc. (NYSE:PEP) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is PEP stock a buy or sell? PepsiCo, Inc. (NYSE:PEP) shareholders have witnessed an increase in enthusiasm from smart money in recent months. PepsiCo, Inc. (NYSE:PEP) was in 56 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 65. There were 52 hedge funds in our database with PEP positions at the end of the third quarter. Our calculations also showed that PEP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Yacktman of Yacktman Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage (or at the end of this article). With all of this in mind we’re going to review the recent hedge fund action surrounding PepsiCo, Inc. (NYSE:PEP).
Do Hedge Funds Think PEP Is A Good Stock To Buy Now?
At the end of December, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards PEP over the last 22 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Fundsmith LLP held the most valuable stake in PepsiCo, Inc. (NYSE:PEP), which was worth $1430.9 million at the end of the fourth quarter. On the second spot was Yacktman Asset Management which amassed $481.2 million worth of shares. Diamond Hill Capital, AQR Capital Management, and Two Sigma Advisors 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 Yacktman Asset Management allocated the biggest weight to PepsiCo, Inc. (NYSE:PEP), around 5.95% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, earmarking 5.66 percent of its 13F equity portfolio to PEP.
As industrywide interest jumped, specific money managers were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, assembled the most valuable position in PepsiCo, Inc. (NYSE:PEP). Scopus Asset Management had $27.8 million invested in the company at the end of the quarter. Mark R. Freeman’s Socorro Asset Management also made a $8.8 million investment in the stock during the quarter. The following funds were also among the new PEP investors: Nicholas Bagnall’s Te Ahumairangi Investment Management, Parvinder Thiara’s Athanor Capital, and Valerie Malter’s Matarin Capital.
Let’s now take a look at hedge fund activity in other stocks similar to PepsiCo, Inc. (NYSE:PEP). We will take a look at AT&T Inc. (NYSE:T), Pfizer Inc. (NYSE:PFE), salesforce.com, inc. (NYSE:CRM), Intel Corporation (NASDAQ:INTC), Abbott Laboratories (NYSE:ABT), Oracle Corporation (NASDAQ:ORCL), and AbbVie Inc (NYSE:ABBV). All of these stocks’ market caps are closest to PEP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| T | 58 | 1045081 | 7 |
| PFE | 63 | 1848417 | -3 |
| CRM | 97 | 10576035 | -9 |
| INTC | 72 | 5578824 | 6 |
| ABT | 64 | 4303482 | 2 |
| ORCL | 52 | 2450210 | -4 |
| ABBV | 83 | 6965013 | 1 |
| Average | 69.9 | 4681009 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 69.9 hedge funds with bullish positions and the average amount invested in these stocks was $4681 million. That figure was $4288 million in PEP’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Oracle Corporation (NASDAQ:ORCL) is the least popular one with only 52 bullish hedge fund positions. PepsiCo, Inc. (NYSE:PEP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PEP is 39.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and surpassed the market again by 0.8 percentage points. Unfortunately PEP wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); PEP investors were disappointed as the stock returned -8.6% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
