“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Craft Brew Alliance Inc (NASDAQ:BREW).
Hedge fund interest in Craft Brew Alliance Inc (NASDAQ:BREW) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare BREW to other stocks including The First Bancorp, Inc. (NASDAQ:FNLC), Allot Ltd. (NASDAQ:ALLT), and Strongbridge Biopharma plc (NASDAQ:SBBP) to get a better sense of its popularity.
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 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.
Let’s review the recent hedge fund action encompassing Craft Brew Alliance Inc (NASDAQ:BREW).
What does smart money think about Craft Brew Alliance Inc (NASDAQ:BREW)?
At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in BREW 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.
The largest stake in Craft Brew Alliance Inc (NASDAQ:BREW) was held by Cannell Capital, which reported holding $11.7 million worth of stock at the end of March. It was followed by Marcato Capital Management with a $7 million position. Other investors bullish on the company included Renaissance Technologies, Marcato Capital Management, and Arrowstreet Capital.
Since Craft Brew Alliance Inc (NASDAQ:BREW) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few fund managers who sold off their positions entirely by the end of the third quarter. At the top of the heap, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors dumped the largest investment of the 700 funds tracked by Insider Monkey, valued at an estimated $0.4 million in stock, and Jordan Moelis and Jeff Farroni’s Deep Field Asset Management was right behind this move, as the fund sold off about $0.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Craft Brew Alliance Inc (NASDAQ:BREW) but similarly valued. These stocks are The First Bancorp, Inc. (NASDAQ:FNLC), Allot Ltd. (NASDAQ:ALLT), Strongbridge Biopharma plc (NASDAQ:SBBP), and Xeris Pharmaceuticals, Inc. (NASDAQ:XERS). All of these stocks’ market caps are closest to BREW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FNLC | 1 | 5532 | 0 |
| ALLT | 10 | 54994 | 0 |
| SBBP | 15 | 62949 | 1 |
| XERS | 7 | 56936 | 4 |
| Average | 8.25 | 45103 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $24 million in BREW’s case. Strongbridge Biopharma plc (NASDAQ:SBBP) is the most popular stock in this table. On the other hand The First Bancorp, Inc. (NASDAQ:FNLC) is the least popular one with only 1 bullish hedge fund positions. Craft Brew Alliance Inc (NASDAQ:BREW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BREW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BREW were disappointed as the stock returned -4.1% during the same 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
