Is Yum! Brands, Inc. (YUM) A Good Stock To Buy?

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Yum! Brands, Inc. (NYSE:YUM).

Is Yum! Brands, Inc. (NYSE:YUM) ready to rally soon? Money managers are in a pessimistic mood. The number of long hedge fund positions went down by 4 lately. YUM was in 42 hedge funds’ portfolios at the end of the third quarter of 2016. There were 46 hedge funds in our database with YUM holdings at the end of the previous quarter. 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 Estee Lauder Companies Inc (NYSE:EL), Emerson Electric Co. (NYSE:EMR), and Charles Schwab Corp (NYSE:SCHW) to gather more data points.

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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Keeping this in mind, we’re going to take a glance at the fresh action encompassing Yum! Brands, Inc. (NYSE:YUM).

How are hedge funds trading Yum! Brands, Inc. (NYSE:YUM)?

Heading into the fourth quarter of 2016, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Keith Meister’s Corvex Capital has the number one position in Yum! Brands, Inc. (NYSE:YUM), worth close to $1.91 billion, accounting for 35.8% of its total 13F portfolio. The second most bullish fund manager is Lone Pine Capital, managed by Stephen Mandel, which holds a $569 million position; 2.5% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions consist of Eric W. Mandelblatt’s Soroban Capital Partners, Ken Griffin’s Citadel Investment Group and J Kevin Kenny Jr’s Emerging Sovereign Group.

Because Yum! Brands, Inc. (NYSE:YUM) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few money managers that decided to sell off their full holdings in the third quarter. Intriguingly, James Crichton’s Hitchwood Capital Management dumped the biggest position of the 700 funds tracked by Insider Monkey, worth an estimated $91.2 million in stock. John Burbank’s fund, Passport Capital, also sold off its stock, about $33.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Yum! Brands, Inc. (NYSE:YUM). These stocks are Estee Lauder Companies Inc (NYSE:EL), Emerson Electric Co. (NYSE:EMR), Charles Schwab Corp (NYSE:SCHW), and Korea Electric Power Corporation (ADR) (NYSE:KEP). This group of stocks’ market values are similar to YUM’s market value.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $990 million. That figure was $4.02 billion in YUM’s case. Charles Schwab Corp (NYSE:SCHW) is the most popular stock in this table. On the other hand Korea Electric Power Corporation (ADR) (NYSE:KEP) is the least popular one with only 14 bullish hedge fund positions. Yum! Brands, Inc. (NYSE:YUM) 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 SCHW might be a better candidate to consider a long position.