Is Coca-Cola Europacific Partners PLC (CCEP) A Good Stock To Buy?

·6 min read

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Coca-Cola Europacific Partners PLC (NASDAQ:CCEP).

Is CCEP a good stock to buy? Coca-Cola Europacific Partners PLC (NASDAQ:CCEP) was in 31 hedge funds' portfolios at the end of June. The all time high for this statistic is 40. CCEP investors should be aware of an increase in hedge fund interest in recent months. There were 25 hedge funds in our database with CCEP holdings at the end of March. Our calculations also showed that CCEP isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Keith Meister of Corvex Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's go over the new hedge fund action regarding Coca-Cola Europacific Partners PLC (NASDAQ:CCEP).

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

At Q2's end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CCEP over the last 24 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Bernard Horn's Polaris Capital Management has the most valuable position in Coca-Cola Europacific Partners PLC (NASDAQ:CCEP), worth close to $208.8 million, corresponding to 6.7% of its total 13F portfolio. Coming in second is Stuart Powers of Hengistbury Investment Partners, with a $163.1 million position; the fund has 18.8% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish include Larry Robbins's Glenview Capital, Jack Woodruff's Candlestick Capital Management and Keith Meister's Corvex Capital. In terms of the portfolio weights assigned to each position Hengistbury Investment Partners allocated the biggest weight to Coca-Cola Europacific Partners PLC (NASDAQ:CCEP), around 18.77% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, designating 6.74 percent of its 13F equity portfolio to CCEP.

As one would reasonably expect, some big names have jumped into Coca-Cola Europacific Partners PLC (NASDAQ:CCEP) headfirst. Newbrook Capital Advisors, managed by Robert Boucai, established the largest position in Coca-Cola Europacific Partners PLC (NASDAQ:CCEP). Newbrook Capital Advisors had $69.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $64.1 million position during the quarter. The other funds with brand new CCEP positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, and D. E. Shaw's D E Shaw.

Let's now take a look at hedge fund activity in other stocks similar to Coca-Cola Europacific Partners PLC (NASDAQ:CCEP). These stocks are Deutsche Bank Aktiengesellschaft (NYSE:DB), Laboratory Corp. of America Holdings (NYSE:LH), Hess Corporation (NYSE:HES), Tyson Foods, Inc. (NYSE:TSN), Fifth Third Bancorp (NASDAQ:FITB), Alexandria Real Estate Equities Inc (NYSE:ARE), and Rogers Communications Inc. (NYSE:RCI). This group of stocks' market valuations match CCEP's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DB,20,1860258,4 LH,53,2555270,-1 HES,31,615716,5 TSN,33,743751,5 FITB,41,360346,3 ARE,28,583759,1 RCI,17,357300,-1 Average,31.9,1010914,2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $1011 million. That figure was $1301 million in CCEP's case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand Rogers Communications Inc. (NYSE:RCI) is the least popular one with only 17 bullish hedge fund positions. Coca-Cola Europacific Partners PLC (NASDAQ:CCEP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CCEP is 52.7. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately CCEP wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CCEP investors were disappointed as the stock returned -7.2% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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