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 Beyond Meat, Inc. (NASDAQ:BYND).
Beyond Meat, Inc. (NASDAQ:BYND) was in 16 hedge funds’ portfolios at the end of June. Our calculations also showed that BYND isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s check out the recent hedge fund action encompassing Beyond Meat, Inc. (NASDAQ:BYND).
How are hedge funds trading Beyond Meat, Inc. (NASDAQ:BYND)?
Heading into the third quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16 from one quarter earlier. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Beyond Meat, Inc. (NASDAQ:BYND) was held by Citadel Investment Group, which reported holding $117.8 million worth of stock at the end of March. It was followed by OZ Management with a $11.9 million position. Other investors bullish on the company included Atika Capital, Aristeia Capital, and Lakewood Capital Management.
With a general bullishness amongst the heavyweights, some big names have jumped into Beyond Meat, Inc. (NASDAQ:BYND) headfirst. Citadel Investment Group, managed by Ken Griffin, created the most valuable call position in Beyond Meat, Inc. (NASDAQ:BYND). Citadel Investment Group had $117.8 million invested in the company at the end of the quarter. OZ Management also initiated a $11.9 million position during the quarter. The other funds with brand new BYND positions are Brad Farber’s Atika Capital, Robert Henry Lynch’s Aristeia Capital, and Anthony Bozza’s Lakewood Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Beyond Meat, Inc. (NASDAQ:BYND) but similarly valued. We will take a look at PulteGroup, Inc. (NYSE:PHM), CPFL Energia S.A. (NYSE:CPL), WEX Inc (NYSE:WEX), and The Interpublic Group of Companies, Inc. (NYSE:IPG). This group of stocks’ market caps are similar to BYND’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PHM | 31 | 838424 | 6 |
| CPL | 4 | 17571 | 2 |
| WEX | 31 | 574756 | 1 |
| IPG | 32 | 881757 | 6 |
| Average | 24.5 | 578127 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $578 million. That figure was $67 million in BYND’s case. The Interpublic Group of Companies, Inc. (NYSE:IPG) is the most popular stock in this table. On the other hand CPFL Energia S.A. (NYSE:CPL) is the least popular one with only 4 bullish hedge fund positions. Beyond Meat, Inc. (NASDAQ:BYND) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BYND wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BYND investors were disappointed as the stock returned -7.5% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.