Is SYSCO Corporation (SYY) Going to Burn These Hedge Funds?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

SYSCO Corporation (NYSE:SYY) has experienced an increase in hedge fund interest in recent months. SYY was in 33 hedge funds’ portfolios at the end of September. There were 31 hedge funds in our database with SYY positions at the end of the previous quarter. At the end of this article we will also compare SYY to other stocks including Kellogg Company (NYSE:K), Intuit Inc. (NASDAQ:INTU), and Sempra Energy (NYSE:SRE) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

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How have hedgies been trading SYSCO Corporation (NYSE:SYY)?

Heading into the fourth quarter of 2016, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, 6% higher compared to the second quarter of 2016, and hitting a yearly high. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Trian Partners, managed by Nelson Peltz, holds the largest position in SYSCO Corporation (NYSE:SYY). The fund reportedly has a $2.15 billion position in the stock, comprising 21.1% of its 13F portfolio. Sitting at the No. 2 spot is Donald Yacktman of Yacktman Asset Management, with a $700.5 million bet; 6.1% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions consist of Jim Simons’ Renaissance Technologies, Cliff Asness’ AQR Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

With general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Arrowstreet Capital initiated the largest position in SYSCO Corporation (NYSE:SYY). According to regulatory filings, the fund had $83.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $10.2 million investment in the stock during the quarter. The following funds were also among the new SYY investors: David Harding’s Winton Capital Management, Glenn Russell Dubin’s Highbridge Capital Management, and Ray Carroll’s Breton Hill Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as SYSCO Corporation (NYSE:SYY) but similarly valued. These stocks are Kellogg Company (NYSE:K), Intuit Inc. (NASDAQ:INTU), Sempra Energy (NYSE:SRE), and Tesla Motors Inc (NASDAQ:TSLA). This group of stocks’ market caps are similar to SYY’s market cap.

As you can see these stocks had an average of 29 hedge funds with bullish positions and the average amount invested in these stocks was $913 million. That figure was a whooping $3.56 billion in SYY’s case. Kellogg Company (NYSE:K) is the most popular stock in this table. On the other hand Sempra Energy (NYSE:SRE) is the least popular one with only 16 bullish hedge fund positions. SYSCO Corporation (NYSE:SYY) 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 K might be a better candidate to consider a long position in.

Disclosure: None