The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Constellation Brands, Inc. (NYSE:STZ).
Is Constellation Brands (STZ) stock a buy or sell? Investors who are in the know were in a bullish mood. The number of long hedge fund positions increased by 5 in recent months. Constellation Brands, Inc. (NYSE:STZ) was in 58 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 71. Our calculations also showed that STZ isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 53 hedge funds in our database with STZ positions at the end of the third quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Lowenstein of Kensico Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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 (or at the end of this article). Keeping this in mind let’s take a glance at the fresh hedge fund action surrounding Constellation Brands, Inc. (NYSE:STZ).
Do Hedge Funds Think STZ Is A Good Stock To Buy Now?
At the end of December, a total of 58 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards STZ over the last 22 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Kensico Capital held the most valuable stake in Constellation Brands, Inc. (NYSE:STZ), which was worth $297.8 million at the end of the fourth quarter. On the second spot was Palestra Capital Management which amassed $192.5 million worth of shares. Two Sigma Advisors, Gates Capital Management, and D E Shaw 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 BlueDrive Global Investors allocated the biggest weight to Constellation Brands, Inc. (NYSE:STZ), around 14.01% of its 13F portfolio. Kensico Capital is also relatively very bullish on the stock, earmarking 6.92 percent of its 13F equity portfolio to STZ.
Now, specific money managers were leading the bulls’ herd. Becker Drapkin Management, managed by Matthew Drapkin and Steven R. Becker, initiated the biggest position in Constellation Brands, Inc. (NYSE:STZ). Becker Drapkin Management had $8.8 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $5.6 million position during the quarter. The other funds with brand new STZ positions are Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Kamyar Khajavi’s MIK Capital, and Graham F. Smith’s Franklin Street Capital.
Let’s also examine hedge fund activity in other stocks similar to Constellation Brands, Inc. (NYSE:STZ). These stocks are Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), The Kraft Heinz Company (NASDAQ:KHC), Metlife Inc (NYSE:MET), Roku, Inc. (NASDAQ:ROKU), Align Technology, Inc. (NASDAQ:ALGN), Electronic Arts Inc. (NASDAQ:EA), and National Grid plc (NYSE:NGG). This group of stocks’ market valuations are closest to STZ’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMFG | 10 | 92749 | 2 |
| KHC | 36 | 11558217 | -3 |
| MET | 37 | 983027 | 1 |
| ROKU | 60 | 3237943 | 1 |
| ALGN | 50 | 2480630 | 3 |
| EA | 50 | 1050954 | -12 |
| NGG | 5 | 352676 | -1 |
| Average | 35.4 | 2822314 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.4 hedge funds with bullish positions and the average amount invested in these stocks was $2822 million. That figure was $1768 million in STZ’s case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 5 bullish hedge fund positions. Constellation Brands, Inc. (NYSE:STZ) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for STZ is 82.7. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on STZ as the stock returned 7.5% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Constellation Brands Inc. (NYSE:STZ)
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Disclosure: None. This article was originally published at Insider Monkey.
