In this article we will check out the progression of hedge fund sentiment towards BellRing Brands, Inc. (NYSE:BRBR) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
BellRing Brands, Inc. (NYSE:BRBR) has experienced a decrease in hedge fund sentiment lately. Our calculations also showed that BRBR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Philippe Laffont of Coatue Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding BellRing Brands, Inc. (NYSE:BRBR).
How have hedgies been trading BellRing Brands, Inc. (NYSE:BRBR)?
Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in BRBR a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Route One Investment Company, managed by William Duhamel, holds the number one position in BellRing Brands, Inc. (NYSE:BRBR). Route One Investment Company has a $86.3 million position in the stock, comprising 2.8% of its 13F portfolio. The second most bullish fund manager is Driehaus Capital, managed by Richard Driehaus, which holds a $13.9 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism contain Jack Woodruff’s Candlestick Capital Management, Brandon Haley’s Holocene Advisors and Chuck Royce’s Royce & Associates. In terms of the portfolio weights assigned to each position Route One Investment Company allocated the biggest weight to BellRing Brands, Inc. (NYSE:BRBR), around 2.83% of its 13F portfolio. Lyon Street Capital is also relatively very bullish on the stock, dishing out 2.11 percent of its 13F equity portfolio to BRBR.
Because BellRing Brands, Inc. (NYSE:BRBR) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there were a few hedge funds who were dropping their positions entirely by the end of the first quarter. At the top of the heap, Philippe Laffont’s Coatue Management said goodbye to the largest stake of all the hedgies followed by Insider Monkey, comprising close to $0.6 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also cut its stock, about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest fell by 1 funds by the end of the first quarter.
Let’s check out hedge fund activity in other stocks similar to BellRing Brands, Inc. (NYSE:BRBR). These stocks are Patrick Industries, Inc. (NASDAQ:PATK), Upland Software Inc (NASDAQ:UPLD), Qiwi PLC (NASDAQ:QIWI), and Gossamer Bio, Inc. (NASDAQ:GOSS). This group of stocks’ market caps are closest to BRBR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PATK | 13 | 50010 | -5 |
| UPLD | 17 | 143956 | -5 |
| QIWI | 11 | 42137 | 1 |
| GOSS | 10 | 80706 | -2 |
| Average | 12.75 | 79202 | -2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $79 million. That figure was $136 million in BRBR’s case. Upland Software Inc (NASDAQ:UPLD) is the most popular stock in this table. On the other hand Gossamer Bio, Inc. (NASDAQ:GOSS) is the least popular one with only 10 bullish hedge fund positions. BellRing Brands, Inc. (NYSE:BRBR) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately BRBR wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BRBR were disappointed as the stock returned 9.4% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.