Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 835 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 December 31st. In this article we look at what those investors think of Yum! Brands, Inc. (NYSE:YUM).
Yum! Brands, Inc. (NYSE:YUM) has experienced a decrease in hedge fund interest in recent months. Our calculations also showed that YUM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are seen as unimportant, outdated financial tools of the past. While there are over 8000 funds in operation today, Our experts look at the bigwigs of this group, around 850 funds. These hedge fund managers administer the lion’s share of all hedge funds’ total capital, and by following their inimitable equity investments, Insider Monkey has brought to light various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Blair Levinsky of Waratah Capital Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the latest hedge fund action surrounding Yum! Brands, Inc. (NYSE:YUM).
How are hedge funds trading Yum! Brands, Inc. (NYSE:YUM)?
At the end of the fourth quarter, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in YUM a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Yum! Brands, Inc. (NYSE:YUM), with a stake worth $78.1 million reported as of the end of September. Trailing D E Shaw was Two Sigma Advisors, which amassed a stake valued at $71.5 million. Alkeon Capital Management, Citadel Investment Group, and Millennium 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 White Elm Capital allocated the biggest weight to Yum! Brands, Inc. (NYSE:YUM), around 0.96% of its 13F portfolio. Cognios Capital is also relatively very bullish on the stock, dishing out 0.78 percent of its 13F equity portfolio to YUM.
Since Yum! Brands, Inc. (NYSE:YUM) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of funds who sold off their entire stakes heading into Q4. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest position of all the hedgies tracked by Insider Monkey, valued at close to $61.4 million in stock. Renaissance Technologies, also said goodbye to its stock, about $29.5 million worth. These transactions are important to note, as total hedge fund interest fell by 3 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Yum! Brands, Inc. (NYSE:YUM) but similarly valued. These stocks are Paychex, Inc. (NASDAQ:PAYX), IHS Markit Ltd. (NYSE:INFO), Lululemon Athletica inc. (NASDAQ:LULU), and Consolidated Edison, Inc. (NYSE:ED). This group of stocks’ market valuations match YUM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PAYX | 36 | 713174 | 4 |
| INFO | 29 | 729273 | -1 |
| LULU | 47 | 1133491 | -5 |
| ED | 26 | 1204354 | 2 |
| Average | 34.5 | 945073 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $945 million. That figure was $463 million in YUM’s case. Lululemon Athletica inc. (NASDAQ:LULU) is the most popular stock in this table. On the other hand Consolidated Edison, Inc. (NYSE:ED) is the least popular one with only 26 bullish hedge fund positions. Yum! Brands, Inc. (NYSE:YUM) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately YUM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on YUM were disappointed as the stock returned -19.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
