The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Yum China Holdings, Inc. (NYSE:YUMC).
Is YUMC a good stock to buy? Yum China Holdings, Inc. (NYSE:YUMC) has experienced a decrease in support from the world’s most elite money managers in recent months. Yum China Holdings, Inc. (NYSE:YUMC) was in 34 hedge funds’ portfolios at the end of March. The all time high for this statistic is 39. Our calculations also showed that YUMC isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla 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. Keeping this in mind let’s analyze the fresh hedge fund action encompassing Yum China Holdings, Inc. (NYSE:YUMC).
Do Hedge Funds Think YUMC Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards YUMC over the last 23 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, GuardCap Asset Management held the most valuable stake in Yum China Holdings, Inc. (NYSE:YUMC), which was worth $349.2 million at the end of the fourth quarter. On the second spot was Tremblant Capital which amassed $107.7 million worth of shares. GQG Partners, Broad Peak Investment Holdings, and Platinum Asset Management 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 0 allocated the biggest weight to Yum China Holdings, Inc. (NYSE:YUMC), around 6.67% of its 13F portfolio. 0 is also relatively very bullish on the stock, dishing out 6.31 percent of its 13F equity portfolio to YUMC.
Since Yum China Holdings, Inc. (NYSE:YUMC) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who sold off their positions entirely last quarter. Intriguingly, James Parsons’s Junto Capital Management said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, valued at close to $154.2 million in stock. Renaissance Technologies, also dropped its stock, about $69.1 million worth. These moves are interesting, as total hedge fund interest dropped by 5 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Yum China Holdings, Inc. (NYSE:YUMC) but similarly valued. These stocks are Laboratory Corp. of America Holdings (NYSE:LH), Occidental Petroleum Corporation (NYSE:OXY), Deutsche Bank AG (NYSE:DB), Expedia Group Inc (NASDAQ:EXPE), Carnival Corporation & plc (NYSE:CUK), Maxim Integrated Products Inc. (NASDAQ:MXIM), and DraftKings Inc. (NASDAQ:DKNG). This group of stocks’ market valuations resemble YUMC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LH | 54 | 2476443 | -12 |
| OXY | 52 | 3418445 | 3 |
| DB | 16 | 1773587 | 0 |
| EXPE | 86 | 6157292 | 10 |
| CUK | 4 | 105412 | -3 |
| MXIM | 55 | 3238393 | 1 |
| DKNG | 43 | 966256 | -5 |
| Average | 44.3 | 2590833 | -0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 44.3 hedge funds with bullish positions and the average amount invested in these stocks was $2591 million. That figure was $976 million in YUMC’s case. Expedia Group Inc (NASDAQ:EXPE) is the most popular stock in this table. On the other hand Carnival Corporation & plc (NYSE:CUK) is the least popular one with only 4 bullish hedge fund positions. Yum China Holdings, Inc. (NYSE:YUMC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for YUMC is 44.4. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on YUMC, though not to the same extent, as the stock returned 11.7% since the end of Q1 (through June 25th) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.
