Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 24.4% during the first 9 months of 2019 and outperformed the broader market benchmark by 4 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Craft Brew Alliance Inc (NASDAQ:BREW) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. Our calculations also showed that BREW isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the recent hedge fund action regarding Craft Brew Alliance Inc (NASDAQ:BREW).
What does smart money think about Craft Brew Alliance Inc (NASDAQ:BREW)?
At Q2’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BREW over the last 16 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Cannell Capital held the most valuable stake in Craft Brew Alliance Inc (NASDAQ:BREW), which was worth $11.7 million at the end of the second quarter. On the second spot was Marcato Capital Management which amassed $7 million worth of shares. Moreover, Renaissance Technologies, Springbok Capital, and Manatuck Hill Partners were also bullish on Craft Brew Alliance Inc (NASDAQ:BREW), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. PEAK6 Capital Management, managed by Matthew Hulsizer, created the most outsized position in Craft Brew Alliance Inc (NASDAQ:BREW). PEAK6 Capital Management had $0.6 million invested in the company at the end of the quarter. Philippe Laffont’s Coatue Management also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Peter Muller’s PDT Partners.
Let’s go over hedge fund activity in other stocks similar to Craft Brew Alliance Inc (NASDAQ:BREW). We will take a look at L.B. Foster Company (NASDAQ:FSTR), TuanChe Limited (NASDAQ:TC), Titan International Inc (NYSE:TWI), and American Midstream Partners LP (NYSE:AMID). This group of stocks’ market caps are closest to BREW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FSTR | 15 | 68558 | 1 |
| TC | 2 | 137 | 1 |
| TWI | 10 | 73341 | -3 |
| AMID | 7 | 32088 | -1 |
| Average | 8.5 | 43531 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $21 million in BREW’s case. L.B. Foster Company (NASDAQ:FSTR) is the most popular stock in this table. On the other hand TuanChe Limited (NASDAQ:TC) is the least popular one with only 2 bullish hedge fund positions. Craft Brew Alliance Inc (NASDAQ:BREW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BREW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BREW were disappointed as the stock returned -41.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
