Insider Monkey
Were Hedge Funds Right About McDonald’s Corporation (MCD)?
Abigail Fisher

In This Article:

"October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being '08 and the Crash of '87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the '87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March '09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher." This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.

McDonald's Corporation (NYSE:MCD) was in 48 hedge funds' portfolios at the end of the fourth quarter of 2018. MCD investors should be aware of an increase in support from the world's most elite money managers in recent months. There were 38 hedge funds in our database with MCD holdings at the end of the previous quarter. Our calculations also showed that MCD isn't among the 30 most popular stocks among hedge funds.

In the eyes of most market participants, hedge funds are viewed as unimportant, old financial tools of the past. While there are more than 8000 funds in operation at present, Our researchers choose to focus on the leaders of this group, about 750 funds. These money managers administer the majority of all hedge funds' total asset base, and by watching their top equity investments, Insider Monkey has unearthed a few investment strategies that have historically exceeded the market. Insider Monkey's flagship hedge fund strategy defeated the S&P 500 index by nearly 5 percentage points a 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 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

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