Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Anheuser-Busch InBev SA/NV (NYSE:BUD).
Is Anheuser-Busch InBev SA/NV (NYSE:BUD) the right investment to pursue these days? Investors who are in the know are getting more optimistic. The number of bullish hedge fund positions advanced by 2 in recent months. Our calculations also showed that BUD isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). BUD was in 23 hedge funds’ portfolios at the end of December. There were 21 hedge funds in our database with BUD positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ken Fisher of Fisher Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to view the key hedge fund action surrounding Anheuser-Busch InBev SA/NV (NYSE:BUD).
What have hedge funds been doing with Anheuser-Busch InBev SA/NV (NYSE:BUD)?
Heading into the first quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BUD over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Anheuser-Busch InBev SA/NV (NYSE:BUD) was held by Gardner Russo & Gardner, which reported holding $618.2 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $576.6 million position. Other investors bullish on the company included Renaissance Technologies, Manikay Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Manikay Partners allocated the biggest weight to Anheuser-Busch InBev SA/NV (NYSE:BUD), around 4.96% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, setting aside 4.74 percent of its 13F equity portfolio to BUD.
As one would reasonably expect, key money managers have jumped into Anheuser-Busch InBev SA/NV (NYSE:BUD) headfirst. Steadfast Capital Management, managed by Robert Pitts, established the most valuable position in Anheuser-Busch InBev SA/NV (NYSE:BUD). Steadfast Capital Management had $6.3 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also made a $4.1 million investment in the stock during the quarter. The other funds with brand new BUD positions are Matthew Tewksbury’s Stevens Capital Management, Parvinder Thiara’s Athanor Capital, and Jonathan Esfandi’s JNE Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Anheuser-Busch InBev SA/NV (NYSE:BUD) but similarly valued. We will take a look at Adobe Inc. (NASDAQ:ADBE), HSBC Holdings plc (NYSE:HSBC), NIKE, Inc. (NYSE:NKE), and Abbott Laboratories (NYSE:ABT). This group of stocks’ market caps resemble BUD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADBE | 106 | 9784116 | 4 |
| HSBC | 18 | 1118976 | 2 |
| NKE | 81 | 2510260 | 12 |
| ABT | 62 | 2055531 | -3 |
| Average | 66.75 | 3867221 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 66.75 hedge funds with bullish positions and the average amount invested in these stocks was $3867 million. That figure was $1479 million in BUD’s case. Adobe Inc. (NASDAQ:ADBE) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 18 bullish hedge fund positions. Anheuser-Busch InBev SA/NV (NYSE:BUD) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately BUD wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BUD investors were disappointed as the stock returned -40% during the same time period 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 most of these stocks already outperformed the market in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
