The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Yum China Holdings, Inc. (NYSE:YUMC) based on those filings.
Yum China Holdings, Inc. (NYSE:YUMC) has seen a decrease in hedge fund sentiment recently. YUMC was in 24 hedge funds’ portfolios at the end of March. There were 29 hedge funds in our database with YUMC holdings at the end of the previous quarter. Our calculations also showed that YUMC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Lowenstein of Kensico Capital
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the new hedge fund action regarding Yum China Holdings, Inc. (NYSE:YUMC).
How have hedgies been trading Yum China Holdings, Inc. (NYSE:YUMC)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the fourth quarter of 2019. By comparison, 30 hedge funds held shares or bullish call options in YUMC a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Yum China Holdings, Inc. (NYSE:YUMC) was held by Broad Peak Investment Holdings, which reported holding $140.1 million worth of stock at the end of September. It was followed by GuardCap Asset Management with a $121 million position. Other investors bullish on the company included Antipodes Partners, Platinum Asset Management, and Kensico Capital. In terms of the portfolio weights assigned to each position Broad Peak Investment Holdings allocated the biggest weight to Yum China Holdings, Inc. (NYSE:YUMC), around 16.31% of its 13F portfolio. Tiger Pacific Capital is also relatively very bullish on the stock, setting aside 8.09 percent of its 13F equity portfolio to YUMC.
Due to the fact that Yum China Holdings, Inc. (NYSE:YUMC) has witnessed bearish sentiment from hedge fund managers, it’s safe to say that there was a specific group of hedgies who sold off their full holdings heading into Q4. At the top of the heap, Noam Gottesman’s GLG Partners said goodbye to the biggest investment of the 750 funds watched by Insider Monkey, comprising close to $30.2 million in stock. Manoj Jain and Sohit Khurana’s fund, Maso Capital, also sold off its stock, about $7.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 5 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Yum China Holdings, Inc. (NYSE:YUMC) but similarly valued. We will take a look at Copart, Inc. (NASDAQ:CPRT), FleetCor Technologies, Inc. (NYSE:FLT), Incyte Corporation (NASDAQ:INCY), and Northern Trust Corporation (NASDAQ:NTRS). All of these stocks’ market caps are similar to YUMC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPRT | 48 | 732842 | 2 |
| FLT | 51 | 1655053 | 7 |
| INCY | 40 | 3325488 | -6 |
| NTRS | 27 | 330348 | -8 |
| Average | 41.5 | 1510933 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.5 hedge funds with bullish positions and the average amount invested in these stocks was $1511 million. That figure was $721 million in YUMC’s case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Northern Trust Corporation (NASDAQ:NTRS) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Yum China Holdings, Inc. (NYSE:YUMC) is even less popular than NTRS. Hedge funds dodged a bullet by taking a bearish stance towards YUMC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately YUMC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); YUMC investors were disappointed as the stock returned 17.8% during the second quarter (through June 10th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
