Were Hedge Funds Right About Yum! Brands, Inc. (YUM)?

In this article we will take a look at whether hedge funds think Yum! Brands, Inc. (NYSE:YUM) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Yum! Brands, Inc. (NYSE:YUM) shareholders have witnessed an increase in hedge fund sentiment lately. Yum! Brands, Inc. (NYSE:YUM) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistic is 65. There were 32 hedge funds in our database with YUM positions at the end of the first quarter. Our calculations also showed that YUM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

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 are checking out stock pitches like this emerging lithium stock. 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. 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. With all of this in mind let’s check out the new hedge fund action surrounding Yum! Brands, Inc. (NYSE:YUM).

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

At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from the first quarter of 2020. On the other hand, there were a total of 47 hedge funds with a bullish position in YUM a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

More specifically, 0 was the largest shareholder of Yum! Brands, Inc. (NYSE:YUM), with a stake worth $265.7 million reported as of the end of June. Trailing Alkeon Capital Management was Arrowstreet Capital, which amassed a stake valued at $108.3 million. Bridgewater Associates, Senator Investment Group, and Citadel Investment Group 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 Kehrs Ridge Capital allocated the biggest weight to Yum! Brands, Inc. (NYSE:YUM), around 2.82% of its 13F portfolio. Masterton Capital Management is also relatively very bullish on the stock, dishing out 2.24 percent of its 13F equity portfolio to YUM.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Kehrs Ridge Capital, managed by Brian Scudieri, initiated the most outsized position in Yum! Brands, Inc. (NYSE:YUM). Kehrs Ridge Capital had $6.9 million invested in the company at the end of the quarter. Qing Li’s Sciencast Management also made a $3.2 million investment in the stock during the quarter. The following funds were also among the new YUM investors: Jinghua Yan’s TwinBeech Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and D. E. Shaw’s D E Shaw.

Let’s now take a look at hedge fund activity in other stocks similar to Yum! Brands, Inc. (NYSE:YUM). We will take a look at Archer Daniels Midland Company (NYSE:ADM), Hilton Worldwide Holdings Inc (NYSE:HLT), Zimmer Biomet Holdings Inc (NYSE:ZBH), Rockwell Automation Inc. (NYSE:ROK), Chewy, Inc. (NYSE:CHWY), Stanley Black & Decker, Inc. (NYSE:SWK), and First Republic Bank (NYSE:FRC). All of these stocks’ market caps resemble YUM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 40 hedge funds with bullish positions and the average amount invested in these stocks was $1509 million. That figure was $652 million in YUM’s case. Zimmer Biomet Holdings Inc (NYSE:ZBH) is the most popular stock in this table. On the other hand Rockwell Automation Inc. (NYSE:ROK) is the least popular one with only 25 bullish hedge fund positions. Yum! Brands, Inc. (NYSE:YUM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for YUM is 45.9. 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. 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 through November 5th and still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on YUM as the stock returned 10.5% since the end of the second quarter (through 11/5) and outperformed the market by an even larger margin.

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