Should I Avoid PepsiCo, Inc. (PEP)?

·5 min read

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 867 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 September 30th. In this article we look at what those investors think of PepsiCo, Inc. (NASDAQ:PEP).

PepsiCo, Inc. (NASDAQ:PEP) shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. PepsiCo, Inc. (NASDAQ:PEP) was in 61 hedge funds' portfolios at the end of September. The all time high for this statistic is 66. Our calculations also showed that PEP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 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. Now let's review the fresh hedge fund action surrounding PepsiCo, Inc. (NASDAQ:PEP).

Donald Yacktman of Yacktman Asset Management

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

Heading into the fourth quarter of 2021, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PEP over the last 25 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

The largest stake in PepsiCo, Inc. (NASDAQ:PEP) was held by Fundsmith LLP, which reported holding $1518 million worth of stock at the end of September. It was followed by Yacktman Asset Management with a $672.2 million position. Other investors bullish on the company included Arrowstreet Capital, Bridgewater Associates, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Yacktman Asset Management allocated the biggest weight to PepsiCo, Inc. (NASDAQ:PEP), around 6.46% of its 13F portfolio. Kehrs Ridge Capital is also relatively very bullish on the stock, setting aside 5.83 percent of its 13F equity portfolio to PEP.

Due to the fact that PepsiCo, Inc. (NASDAQ:PEP) has faced bearish sentiment from the smart money, logic holds that there lies a certain "tier" of hedge funds who were dropping their positions entirely by the end of the third quarter. Intriguingly, Matthew Stadelman's Diamond Hill Capital said goodbye to the largest position of the "upper crust" of funds watched by Insider Monkey, worth an estimated $541.1 million in stock. Jack Woodruff's fund, Candlestick Capital Management, also dumped its stock, about $37 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 5 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as PepsiCo, Inc. (NASDAQ:PEP) but similarly valued. These stocks are Accenture Plc (NYSE:ACN), Broadcom Inc (NASDAQ:AVGO), Costco Wholesale Corporation (NASDAQ:COST), Chevron Corporation (NYSE:CVX), AT&T Inc. (NYSE:T), AbbVie Inc (NYSE:ABBV), and Wells Fargo & Company (NYSE:WFC). This group of stocks' market valuations are similar to PEP's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACN,56,4460650,4 AVGO,50,2706386,3 COST,55,4393346,1 CVX,51,4442202,1 T,66,3212098,-2 ABBV,81,4140050,-1 WFC,88,6188279,-6 Average,63.9,4220430,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 63.9 hedge funds with bullish positions and the average amount invested in these stocks was $4220 million. That figure was $4435 million in PEP's case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand Broadcom Inc (NASDAQ:AVGO) is the least popular one with only 50 bullish hedge fund positions. PepsiCo, Inc. (NASDAQ:PEP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for PEP is 42.2. 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 28.6% in 2021 through November 30th and beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on PEP, though not to the same extent, as the stock returned 6.2% since the end of Q3 (through November 30th) and outperformed the market.

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

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