After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards The Coca-Cola Company (NYSE:KO).
The Coca-Cola Company (NYSE:KO) shareholders have witnessed an increase in enthusiasm from smart money lately. The Coca-Cola Company (NYSE:KO) was in 62 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 62. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Do Hedge Funds Think KO Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. By comparison, 51 hedge funds held shares or bullish call options in KO a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of The Coca-Cola Company (NYSE:KO), with a stake worth $21936 million reported as of the end of December. Trailing Berkshire Hathaway was Yacktman Asset Management, which amassed a stake valued at $351.2 million. D E Shaw, Bridgewater Associates, and Adage Capital 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 Berkshire Hathaway allocated the biggest weight to The Coca-Cola Company (NYSE:KO), around 8.13% of its 13F portfolio. Franklin Street Capital is also relatively very bullish on the stock, earmarking 7.39 percent of its 13F equity portfolio to KO.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the largest position in The Coca-Cola Company (NYSE:KO). Balyasny Asset Management had $133.4 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $119.2 million position during the quarter. The other funds with new positions in the stock are Parvinder Thiara’s Athanor Capital, Mark R. Freeman’s Socorro Asset Management, and Minhua Zhang’s Weld Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Coca-Cola Company (NYSE:KO) but similarly valued. These stocks are NIKE, Inc. (NYSE:NKE), Pinduoduo Inc. (NASDAQ:PDD), Toyota Motor Corporation (NYSE:TM), Novartis AG (NYSE:NVS), Merck & Co., Inc. (NYSE:MRK), ASML Holding N.V. (NASDAQ:ASML), and PepsiCo, Inc. (NYSE:PEP). All of these stocks’ market caps are closest to KO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NKE | 82 | 6285513 | 7 |
| PDD | 54 | 10528058 | 20 |
| TM | 11 | 797163 | -1 |
| NVS | 23 | 1680463 | -2 |
| MRK | 82 | 7171072 | 2 |
| ASML | 30 | 2976227 | 7 |
| PEP | 56 | 4288005 | 4 |
| Average | 48.3 | 4818072 | 5.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.3 hedge funds with bullish positions and the average amount invested in these stocks was $4818 million. That figure was $24683 million in KO’s case. NIKE, Inc. (NYSE:NKE) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 11 bullish hedge fund positions. The Coca-Cola Company (NYSE:KO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KO is 72.9. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately KO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KO were disappointed as the stock returned -0.7% since the end of December (through 4/30) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
