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5 Stocks Hedge Funds Love -- and So Should You

Stocks in this article: GMCVDADTYUMLOW

Yum! Brands

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Last up on our list of hedge funds' favorite stocks is Yum! Brands (YUM). Yum! owns an array of popular fast food restaurant concepts, including KFC, Taco Bell and Pizza Hut. The firm has more than 37,000 stores in 120 countries, making it the largest restaurant network in the world.

Yum! was one of the first U.S. fast food franchisors to open stores in China, and it's been one of the biggest beneficiaries in the consumption growth among the new Chinese middle class. Importantly, the firm was quick to embrace conforming to local tastes with new brands, rather than simply opening Taco Bell locations in Beijing. Despite being in the region for a while now, there's still a lot of growth to squeeze out of the region for Yum! in the next few years. Here at home, the franchise restaurant model is still lucrative for owners like Yum! Brands because it generates consistent recurring revenues, and gives the firm the cash generation ability to pay a decent dividend yield.

Hedge funds have been piling into this stock for the past quarter, adding 5.39 million shares to more than double their stake in the fast food giant. That brings hedge funds' total ownership in YUM to $541 million.

-- Written by Jonas Elmerraji in Baltimore.

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

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