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Ken Griffin, a prominent billionaire hedge fund manager, leads Citadel Advisors as its CEO. Recent reports from Citadel’s 13F filing reveal that the firm acquired 18,736,591 shares of Kenvue (NYSE: KVUE) in the second quarter of this year, significantly boosting its stake by an astounding 5,848%.
In this article, I will explore the potential advantages of investing in Kenvue at this moment. Additionally, I will evaluate the company’s overall positioning and argue why this consumer health entity might be a solid long-term investment for the discerning investor.
While Kenvue’s name may not ring a bell, its portfolio includes some of the most recognizable health brands in the market. The company is behind household names such as Aveeno, Listerine, Zyrtec, Tylenol, Motrin, Benadryl, Neosporin, Neutrogena, Nicorette, and Band-Aid.
With the onset of flu season, it’s likely that Kenvue will experience a spike in demand for its over-the-counter products aimed at treating allergies and colds.
Kenvue emerged as a spin-off of Johnson & Johnson, and has only been trading as an independent entity for just over a year. Despite its brief existence in the market, the information below regarding Citadel’s holdings in Kenvue over the past year reveals some noteworthy trends.
Category
Q2 2023
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Shares owned
6.6 million
2.6 million
2.4 million
320,000
19.1 million
Data source: Hedge Follow.
Citadel acquired 6.6 million shares of Kenvue around its initial public offering (IPO). However, up until the second quarter of this year, Griffin’s team was primarily selling off their shares in the company.
What prompts such a significant shift in strategy after a period of consistent selling?
To start, Kenvue’s stock has dropped approximately 15% since its market debut, and it currently trades at a forward price-to-earnings (P/E) ratio lower than that of the S&P 500. This might indicate that Citadel perceives Kenvue as undervalued, believing that the market is failing to recognize a potential surge in stock performance, especially as flu season approaches. Given this context, it would not be surprising if Citadel considers this investment more of a tactical maneuver rather than a long-term commitment.
It’s also relevant to note that during the same quarter, Citadel increased its stakes in other consumer staples and healthcare-related stocks, including Pfizer, UnitedHealth Group, Clorox, and Humana. This could suggest that the acquisition of Kenvue shares serves as a strategic hedge within Citadel’s diversified portfolio.
While the exact motivations behind Citadel’s substantial investment in Kenvue may be unclear, I can identify several reasons why I would consider owning this stock.
Primarily, Kenvue offers an attractive dividend yield of 3.8%, roughly three times the average yield of the S&P 500. This alone makes Kenvue a compelling investment opportunity, as the company provides essential products that maintain steady demand. This attribute is particularly noteworthy, given that few companies in the consumer sector can claim similar stability. As such, Kenvue likely appeals to passive income investors, as it’s positioned to sustain or potentially grow its dividend payout.
Though Kenvue may not fit the mold of a conventional growth stock, its long-term potential should not be overlooked. The company possesses a unique status as a defensive and insulated business that can endure various economic conditions and fluctuations in consumer purchasing patterns.
For these reasons, I regard Kenvue stock as an attractive buying opportunity and advise considering shares for a long-term holding strategy.
However, before making any investment decisions regarding Kenvue, it’s prudent to keep the following in mind:
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Adam Spatacco does not hold any positions in the stocks mentioned herein. Furthermore, the Motley Fool has investments in and endorses Kenvue and Pfizer, while also recommending Johnson & Johnson and UnitedHealth Group. Additionally, the Motley Fool has a disclosure policy.
Billionaire Ken Griffin Just Increased His Position in This Dividend Stock by 5,848%. Here’s Why Now May Be a Great Time to Buy. was originally published by The Motley Fool.
Source
finance.yahoo.com