Hedge Funds Have Never Been This Bullish On The Boston Beer Company Inc (SAM)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards The Boston Beer Company Inc (NYSE:SAM).

Is The Boston Beer Company Inc (NYSE:SAM) a first-rate investment right now? Money managers were getting more bullish. The number of bullish hedge fund positions went up by 13 lately. The Boston Beer Company Inc (NYSE:SAM) was in 42 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SAM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 29 hedge funds in our database with SAM holdings at the end of March.

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 79 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

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a glance at the key hedge fund action encompassing The Boston Beer Company Inc (NYSE:SAM).

Do Hedge Funds Think SAM Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 45% from the first quarter of 2020. On the other hand, there were a total of 32 hedge funds with a bullish position in SAM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in The Boston Beer Company Inc (NYSE:SAM), which was worth $239.6 million at the end of the second quarter. On the second spot was Atreides Management which amassed $176.2 million worth of shares. Fisher Asset Management, Citadel Investment Group, and Scopus Asset 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 Stamina Capital Management allocated the biggest weight to The Boston Beer Company Inc (NYSE:SAM), around 3.56% of its 13F portfolio. Atreides Management is also relatively very bullish on the stock, dishing out 3.15 percent of its 13F equity portfolio to SAM.

Now, specific money managers have jumped into The Boston Beer Company Inc (NYSE:SAM) headfirst. Scopus Asset Management, managed by Alexander Mitchell, initiated the biggest position in The Boston Beer Company Inc (NYSE:SAM). Scopus Asset Management had $71.5 million invested in the company at the end of the quarter. Ben Jacobs’s Anomaly Capital Management also made a $13.8 million investment in the stock during the quarter. The other funds with new positions in the stock are James Crichton’s Hitchwood Capital Management, Richard Walters II’s Stony Point Capital, and Israel Englander’s Millennium Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Boston Beer Company Inc (NYSE:SAM) but similarly valued. These stocks are American Homes 4 Rent (NYSE:AMH), Allegion plc (NYSE:ALLE), Universal Health Services, Inc. (NYSE:UHS), Sociedad Quimica y Minera (NYSE:SQM), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Annaly Capital Management, Inc. (NYSE:NLY), and Texas Pacific Land Trust (NYSE:TPL). This group of stocks’ market caps are similar to SAM’s market cap.

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As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $833 million. That figure was $934 million in SAM’s case. Universal Health Services, Inc. (NYSE:UHS) is the most popular stock in this table. On the other hand Sociedad Quimica y Minera (NYSE:SQM) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks The Boston Beer Company Inc (NYSE:SAM) is more popular among hedge funds. Our overall hedge fund sentiment score for SAM is 90. 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. 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 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Unfortunately SAM wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SAM were disappointed as the stock returned -50.1% since the end of the second quarter (through 10/1) 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 most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.

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