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 (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Monster Beverage Corp (NASDAQ:MNST).
Monster Beverage Corp (NASDAQ:MNST) was in 45 hedge funds’ portfolios at the end of December. MNST shareholders have witnessed an increase in enthusiasm from smart money recently. There were 36 hedge funds in our database with MNST holdings at the end of the previous quarter. Our calculations also showed that MNST isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Andreas Halvorsen of Viking Global
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the new hedge fund action encompassing Monster Beverage Corp (NASDAQ:MNST).
What have hedge funds been doing with Monster Beverage Corp (NASDAQ:MNST)?
Heading into the first quarter of 2020, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MNST over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Andreas Halvorsen’s Viking Global has the largest position in Monster Beverage Corp (NASDAQ:MNST), worth close to $822.6 million, comprising 3.9% of its total 13F portfolio. On Viking Global’s heels is Renaissance Technologies, founded by Jim Simons, which holds a $727.8 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Lee Ainslie’s Maverick Capital, Neal C. Bradsher’s Broadwood Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Broadwood Capital allocated the biggest weight to Monster Beverage Corp (NASDAQ:MNST), around 34.29% of its 13F portfolio. Incline Global Management is also relatively very bullish on the stock, earmarking 6.17 percent of its 13F equity portfolio to MNST.
Consequently, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in Monster Beverage Corp (NASDAQ:MNST). Point72 Asset Management had $117.7 million invested in the company at the end of the quarter. Jack Woodruff’s Candlestick Capital Management also initiated a $50.8 million position during the quarter. The other funds with new positions in the stock are Jeff Lignelli’s Incline Global Management, Michael Gelband’s ExodusPoint Capital, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital.
Let’s check out hedge fund activity in other stocks similar to Monster Beverage Corp (NASDAQ:MNST). These stocks are Carnival Corporation & Plc (NYSE:CUK), Cognizant Technology Solutions Corp (NASDAQ:CTSH), China Telecom Corporation Limited (NYSE:CHA), and Xcel Energy Inc (NASDAQ:XEL). This group of stocks’ market values are similar to MNST’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CUK | 14 | 154668 | 3 |
| CTSH | 43 | 2935648 | -5 |
| CHA | 7 | 23480 | -2 |
| XEL | 15 | 394141 | -3 |
| Average | 19.75 | 876984 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $877 million. That figure was $3533 million in MNST’s case. Cognizant Technology Solutions Corp (NASDAQ:CTSH) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Monster Beverage Corp (NASDAQ:MNST) is more popular among hedge funds. 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 17.4% in 2020 through March 25th but still managed to beat the market by 5.5 percentage points. Hedge funds were also right about betting on MNST as the stock returned -15.6% so far in Q1 (through March 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
