Is Pilgrim’s Pride Corporation (PPC) A Good Stock To Buy?

Reymerlyn Martin

Fri, Jun 28, 2019, 7:14 PM

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Pilgrim's Pride Corporation (NASDAQ:PPC).

Is Pilgrim's Pride Corporation (NASDAQ:PPC) a first-rate investment today? The smart money is in a pessimistic mood. The number of long hedge fund positions were trimmed by 3 lately. Our calculations also showed that PPC isn't among the 30 most popular stocks among hedge funds. PPC was in 14 hedge funds' portfolios at the end of the first quarter of 2019. There were 17 hedge funds in our database with PPC holdings at the end of the previous quarter.

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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Let's view the fresh hedge fund action surrounding Pilgrim's Pride Corporation (NASDAQ:PPC).

What have hedge funds been doing with Pilgrim's Pride Corporation (NASDAQ:PPC)?

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in PPC a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Pilgrim's Pride Corporation (NASDAQ:PPC). AQR Capital Management has a $58.6 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $17.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism consist of D. E. Shaw's D E Shaw, Ken Griffin's Citadel Investment Group and David Rosen's Rubric Capital Management.

Because Pilgrim's Pride Corporation (NASDAQ:PPC) has experienced bearish sentiment from the aggregate hedge fund industry, it's safe to say that there were a few hedgies who sold off their full holdings in the third quarter. Interestingly, Matthew Tewksbury's Stevens Capital Management sold off the largest investment of the "upper crust" of funds tracked by Insider Monkey, worth close to $1.5 million in stock. Minhua Zhang's fund, Weld Capital Management, also dropped its stock, about $1.5 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds in the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Pilgrim's Pride Corporation (NASDAQ:PPC) but similarly valued. We will take a look at First Solar, Inc. (NASDAQ:FSLR), Leggett & Platt, Inc. (NYSE:LEG), Equitrans Midstream Corporation (NYSE:ETRN), and WPX Energy Inc (NYSE:WPX). This group of stocks' market valuations are closest to PPC's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FSLR,23,358479,1 LEG,10,27949,1 ETRN,19,559560,-9 WPX,42,794081,-4 Average,23.5,435017,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $435 million. That figure was $141 million in PPC's case. WPX Energy Inc (NYSE:WPX) is the most popular stock in this table. On the other hand Leggett & Platt, Inc. (NYSE:LEG) is the least popular one with only 10 bullish hedge fund positions. Pilgrim's Pride Corporation (NASDAQ:PPC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on PPC as the stock returned 13.4% during the same time frame and outperformed the market by an even larger margin.

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

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