How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Keurig Dr Pepper Inc. (NASDAQ:KDP) and determine whether hedge funds had an edge regarding this stock.
Keurig Dr Pepper Inc. (NASDAQ:KDP) was in 33 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 41. KDP shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. There were 28 hedge funds in our database with KDP positions at the end of the second quarter. Our calculations also showed that KDP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we’re going to review the latest hedge fund action surrounding Keurig Dr Pepper Inc. (NASDAQ:KDP).
Do Hedge Funds Think KDP Is A Good Stock To Buy Now?
At Q3’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 18% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards KDP over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cedar Rock Capital was the largest shareholder of Keurig Dr Pepper Inc. (NASDAQ:KDP), with a stake worth $376.6 million reported as of the end of September. Trailing Cedar Rock Capital was Arrowstreet Capital, which amassed a stake valued at $272 million. Renaissance Technologies, RIT Capital Partners, and Balyasny 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 RIT Capital Partners allocated the biggest weight to Keurig Dr Pepper Inc. (NASDAQ:KDP), around 30.86% of its 13F portfolio. Cedar Rock Capital is also relatively very bullish on the stock, setting aside 9.03 percent of its 13F equity portfolio to KDP.
Now, key money managers have jumped into Keurig Dr Pepper Inc. (NASDAQ:KDP) headfirst. RIT Capital Partners, managed by Jacob Rothschild, assembled the most outsized position in Keurig Dr Pepper Inc. (NASDAQ:KDP). RIT Capital Partners had $79.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $31.2 million investment in the stock during the quarter. The other funds with brand new KDP positions are Sander Gerber’s Hudson Bay Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and Donald Sussman’s Paloma Partners.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Keurig Dr Pepper Inc. (NASDAQ:KDP) but similarly valued. We will take a look at Coupang, Inc. (NYSE:CPNG), Wipro Limited (NYSE:WIT), Marriott International Inc (NYSE:MAR), Twitter Inc (NYSE:TWTR), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Coinbase Global Inc. (NASDAQ:COIN), and Eni SpA (NYSE:E). This group of stocks’ market valuations resemble KDP’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPNG | 45 | 10769505 | 12 |
| WIT | 15 | 183023 | 1 |
| MAR | 39 | 2878858 | -10 |
| TWTR | 94 | 6305635 | 5 |
| SMFG | 11 | 50245 | 0 |
| COIN | 50 | 2968201 | 50 |
| E | 3 | 75414 | 0 |
| Average | 36.7 | 3318697 | 8.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.7 hedge funds with bullish positions and the average amount invested in these stocks was $3319 million. That figure was $1270 million in KDP’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 3 bullish hedge fund positions. Keurig Dr Pepper Inc. (NASDAQ:KDP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KDP is 50.6. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on KDP as the stock returned 11.7% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.
Follow Keurig Dr Pepper Inc. (NYSE:KDP)
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Disclosure: None. This article was originally published at Insider Monkey.
