Were Hedge Funds Right About The Kraft Heinz Company (KHC)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded The Kraft Heinz Company (NASDAQ:KHC) and determine whether the smart money was really smart about this stock.

Hedge fund interest in The Kraft Heinz Company (NASDAQ:KHC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that KHC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). 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 TE Connectivity Ltd. (NYSE:TEL), Carrier Global Corporation (NYSE:CARR), and The Bank of New York Mellon Corporation (NYSE:BK) to gather more data points.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we’re going to view the key hedge fund action encompassing The Kraft Heinz Company (NASDAQ:KHC).

Warren Buffett of Berkshire Hathaway

Do Hedge Funds Think KHC Is A Good Stock To Buy Now?

At Q3’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KHC over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Warren Buffett’s Berkshire Hathaway has the largest position in The Kraft Heinz Company (NASDAQ:KHC), worth close to $11.9899 billion, comprising 4.1% of its total 13F portfolio. Sitting at the No. 2 spot is Bridgewater Associates, managed by Ray Dalio, which holds a $85.1 million position; 0.5% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions consist of Ken Griffin’s Citadel Investment Group, Richard Driehaus’s Driehaus Capital and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Kehrs Ridge Capital allocated the biggest weight to The Kraft Heinz Company (NASDAQ:KHC), around 5.35% of its 13F portfolio. Berkshire Hathaway is also relatively very bullish on the stock, dishing out 4.09 percent of its 13F equity portfolio to KHC.

Seeing as The Kraft Heinz Company (NASDAQ:KHC) has witnessed declining sentiment from hedge fund managers, logic holds that there were a few hedge funds that elected to cut their positions entirely by the end of the third quarter. Interestingly, Michael Burry’s Scion Asset Management cut the largest position of the “upper crust” of funds followed by Insider Monkey, comprising about $58.1 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also sold off its stock, about $34.9 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Kraft Heinz Company (NASDAQ:KHC) but similarly valued. We will take a look at TE Connectivity Ltd. (NYSE:TEL), Carrier Global Corporation (NYSE:CARR), The Bank of New York Mellon Corporation (NYSE:BK), T. Rowe Price Group, Inc. (NASDAQ:TROW), Kimberly Clark Corporation (NYSE:KMB), L3Harris Technologies, Inc. (NYSE:LHX), and Veeva Systems Inc (NYSE:VEEV). This group of stocks’ market valuations match KHC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.4 hedge funds with bullish positions and the average amount invested in these stocks was $1597 million. That figure was $12322 million in KHC’s case. Carrier Global Corporation (NYSE:CARR) is the most popular stock in this table. On the other hand Kimberly Clark Corporation (NYSE:KMB) is the least popular one with only 28 bullish hedge fund positions. The Kraft Heinz Company (NASDAQ:KHC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KHC is 35.4. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 29.6% in 2021 and surpassed the market again by 3.6 percentage points. Unfortunately, KHC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); KHC investors were disappointed as the stock returned -1.7% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.