Is Conagra Brands, Inc. (CAG) Going to Burn These Hedge Funds?

Reymerlyn Martin

Updated Sat, Dec 8, 2018, 7:22 PM

Is Conagra Brands, Inc. (NYSE:CAG) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Conagra Brands, Inc. (NYSE:CAG) investors should be aware of an increase in enthusiasm from smart money of late, after hedge fund ownership hit a three-year low earlier this year. CAG was in 38 hedge funds' portfolios at the end of the third quarter of 2018, up from 31 in the middle of 2018. That left Conagra a long way off from making the list of the 30 Most Popular Stocks Among Hedge Funds, but it did rank 11th among the 20 Dividend Stocks That Billionaires Are Piling On. We laid out some of the reasons Why Food Stocks May Spoil in Your Portfolio in 2018, and Conagra has unfortunately done just that, losing 18% in 2018.

In the eyes of most shareholders, hedge funds are viewed as unimportant, old investment vehicles of yesteryear. While there are over 8,000 funds with their doors open today, our experts choose to focus on the aristocrats of this club, about 700 funds. These hedge fund managers command the majority of the smart money's total asset base, and by watching their top equity investments, Insider Monkey has identified many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by 6 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 26.1% since February 2017 even though the market was up nearly 19% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

What have hedge funds been doing with Conagra Brands, Inc. (NYSE:CAG)?

At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a jump of 23% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in CAG at the beginning of this year. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Citadel Investment Group was the largest shareholder of Conagra Brands, Inc. (NYSE:CAG), with a stake worth $199.6 million reported as of the end of September. Trailing Citadel Investment Group was JANA Partners, which amassed a stake valued at $175.3 million. Two Sigma Advisors, Millennium Management, and Alyeska Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

Now, key hedge funds have jumped into Conagra Brands, Inc. (NYSE:CAG) headfirst. Scopus Asset Management, managed by Alexander Mitchell, established the biggest position in Conagra Brands, Inc. (NYSE:CAG). Scopus Asset Management had $61.1 million invested in the company at the end of the quarter. Jim Simons' Renaissance Technologies also initiated a $59.3 million position during the quarter. The other funds with new positions in the stock are Steve Cohen's Point72 Asset Management, Leon Shaulov's Maplelane Capital, and Bruce Kovner's Caxton Associates LP.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Conagra Brands, Inc. (NYSE:CAG) but similarly valued. We will take a look at Rollins, Inc. (NYSE:ROL), Wayfair Inc (NYSE:W), Garmin Ltd. (NASDAQ:GRMN), and Symantec Corporation (NASDAQ:SYMC). This group of stocks' market caps are closest to CAG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ROL,17,287432,1 W,30,1549111,0 GRMN,27,306746,2 SYMC,33,1466884,8 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $903 million. That figure was $1.06 billion in CAG's case. Symantec Corporation (NASDAQ:SYMC) is the most popular stock in this table. On the other hand Rollins, Inc. (NYSE:ROL) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Conagra Brands, Inc. (NYSE:CAG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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