We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Molson Coors Beverage Company (NYSE:TAP) and determine whether hedge funds skillfully traded this stock.
Is Molson Coors Beverage Company (NYSE:TAP) the right pick for your portfolio? Investors who are in the know were becoming more confident. The number of bullish hedge fund positions rose by 2 in recent months. Molson Coors Beverage Company (NYSE:TAP) was in 36 hedge funds’ portfolios at the end of June. The all time high for this statistics is 70. Our calculations also showed that TAP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 34 hedge funds in our database with TAP holdings at the end of March.
Video: 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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ric Dillon of Diamond Hill Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are also checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to go over the recent hedge fund action regarding Molson Coors Beverage Company (NYSE:TAP).
What have hedge funds been doing with Molson Coors Beverage Company (NYSE:TAP)?
At the end of the second quarter, a total of 36 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in TAP over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Molson Coors Beverage Company (NYSE:TAP), with a stake worth $55.8 million reported as of the end of September. Trailing AQR Capital Management was Nitorum Capital, which amassed a stake valued at $30.1 million. Diamond Hill Capital, Citadel Investment Group, and Fairpointe Capital 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 Fairpointe Capital allocated the biggest weight to Molson Coors Beverage Company (NYSE:TAP), around 3.13% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, designating 1.61 percent of its 13F equity portfolio to TAP.
As aggregate interest increased, key hedge funds were breaking ground themselves. Fairpointe Capital, managed by Thyra Zerhusen, established the largest position in Molson Coors Beverage Company (NYSE:TAP). Fairpointe Capital had $21.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $14.4 million position during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Donald Sussman’s Paloma Partners.
Let’s now review hedge fund activity in other stocks similar to Molson Coors Beverage Company (NYSE:TAP). We will take a look at Gaming and Leisure Properties Inc (NASDAQ:GLPI), Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Ally Financial Inc (NYSE:ALLY), Credit Acceptance Corp. (NASDAQ:CACC), Livongo Health, Inc. (NASDAQ:LVGO), Formula One Group (NASDAQ:FWONK), and WestRock Company (NYSE:WRK). This group of stocks’ market values match TAP’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLPI | 35 | 498974 | 0 |
| MLCO | 32 | 610443 | 4 |
| ALLY | 54 | 1635686 | 9 |
| CACC | 23 | 985846 | 1 |
| LVGO | 36 | 338665 | 19 |
| FWONK | 49 | 1402496 | 12 |
| WRK | 32 | 461872 | 6 |
| Average | 37.3 | 847712 | 7.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.3 hedge funds with bullish positions and the average amount invested in these stocks was $848 million. That figure was $274 million in TAP’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Credit Acceptance Corp. (NASDAQ:CACC) is the least popular one with only 23 bullish hedge fund positions. Molson Coors Beverage Company (NYSE:TAP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TAP is 43.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and surpassed the market by 23.2 percentage points. Unfortunately TAP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TAP investors were disappointed as the stock returned 9.5% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
