How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Monster Beverage Corp (NASDAQ:MNST) and determine whether hedge funds had an edge regarding this stock.
Is Monster Beverage Corp (NASDAQ:MNST) an excellent stock to buy now? The smart money was getting less optimistic. The number of long hedge fund positions fell by 4 recently. Monster Beverage Corp (NASDAQ:MNST) was in 42 hedge funds’ portfolios at the end of September. The all time high for this statistic is 50. Our calculations also showed that MNST 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. With all of this in mind let’s view the key hedge fund action regarding Monster Beverage Corp (NASDAQ:MNST).
Do Hedge Funds Think MNST Is A Good Stock To Buy Now?
At third quarter’s end, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards MNST over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Monster Beverage Corp (NASDAQ:MNST), with a stake worth $614.2 million reported as of the end of September. Trailing Renaissance Technologies was Broadwood Capital, which amassed a stake valued at $413.6 million. Arrowstreet Capital, AQR Capital Management, and Echo Street Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Broadwood Capital allocated the biggest weight to Monster Beverage Corp (NASDAQ:MNST), around 21.09% of its 13F portfolio. Lakehouse Capital is also relatively very bullish on the stock, earmarking 8.18 percent of its 13F equity portfolio to MNST.
Due to the fact that Monster Beverage Corp (NASDAQ:MNST) has witnessed declining sentiment from the smart money, it’s safe to say that there is a sect of funds that slashed their positions entirely last quarter. Interestingly, Alexander Mitchell’s Scopus Asset Management said goodbye to the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at about $75.4 million in stock, and Graham F. Smith’s Franklin Street Capital was right behind this move, as the fund cut about $2.3 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Monster Beverage Corp (NASDAQ:MNST). These stocks are EOG Resources Inc (NYSE:EOG), Palo Alto Networks Inc (NYSE:PANW), IHS Markit Ltd. (NASDAQ:INFO), Global Payments Inc (NYSE:GPN), IQVIA Holdings, Inc. (NYSE:IQV), Synopsys, Inc. (NASDAQ:SNPS), and BCE Inc. (NYSE:BCE). All of these stocks’ market caps are similar to MNST’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EOG | 47 | 1024547 | 12 |
| PANW | 73 | 5899838 | 4 |
| INFO | 64 | 6723219 | 3 |
| GPN | 68 | 3462603 | 2 |
| IQV | 66 | 3756655 | -3 |
| SNPS | 43 | 2343901 | 2 |
| BCE | 15 | 129110 | 1 |
| Average | 53.7 | 3334268 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 53.7 hedge funds with bullish positions and the average amount invested in these stocks was $3334 million. That figure was $2134 million in MNST’s case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 15 bullish hedge fund positions. Monster Beverage Corp (NASDAQ:MNST) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MNST is 49.5. 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 29.6% in 2021 and surpassed the market again by 3.6 percentage points. Unfortunately, MNST wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MNST investors were disappointed as the stock returned -2.4% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Monster Beverage Corp (NASDAQ:MNST)
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Disclosure: None. This article was originally published at Insider Monkey.
