Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018 as investors first worried over the possible ramifications of rising interest rates and the escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only about 60% S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Monster Beverage Corporation (NASDAQ:MNST) and see how the stock is affected by the recent hedge fund activity.
Is Monster Beverage Corporation (NASDAQ:MNST) an outstanding stock to buy now? Hedge funds are taking a bullish view. The number of bullish hedge fund bets inched up by 5 in recent months. Our calculations also showed that MNST isn’t among the 30 most popular stocks among hedge funds. MNST was in 38 hedge funds’ portfolios at the end of the second quarter of 2019. There were 33 hedge funds in our database with MNST positions at the end of the previous quarter.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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. We’re going to view the recent hedge fund action encompassing Monster Beverage Corporation (NASDAQ:MNST).
How are hedge funds trading Monster Beverage Corporation (NASDAQ:MNST)?
At Q2’s end, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in MNST over the last 16 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Viking Global, managed by Andreas Halvorsen, holds the number one position in Monster Beverage Corporation (NASDAQ:MNST). Viking Global has a $565 million position in the stock, comprising 2.5% of its 13F portfolio. The second most bullish fund is Renaissance Technologies, with a $550.5 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism comprise Cliff Asness’s AQR Capital Management, Neal C. Bradsher’s Broadwood Capital and Noam Gottesman’s GLG Partners.
Consequently, key money managers were breaking ground themselves. Viking Global assembled the largest position in Monster Beverage Corporation (NASDAQ:MNST). Viking Global had $565 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $64.1 million investment in the stock during the quarter. The other funds with brand new MNST positions are James Crichton’s Hitchwood Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Minhua Zhang’s Weld Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Monster Beverage Corporation (NASDAQ:MNST) but similarly valued. We will take a look at Humana Inc (NYSE:HUM), eBay Inc (NASDAQ:EBAY), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), and Eaton Corporation plc (NYSE:ETN). All of these stocks’ market caps are similar to MNST’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HUM | 62 | 4261860 | 20 |
| EBAY | 47 | 3898481 | -1 |
| REGN | 37 | 1330987 | 6 |
| ETN | 36 | 796336 | -3 |
| Average | 45.5 | 2571916 | 5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.5 hedge funds with bullish positions and the average amount invested in these stocks was $2572 million. That figure was $2929 million in MNST’s case. Humana Inc (NYSE:HUM) is the most popular stock in this table. On the other hand Eaton Corporation plc (NYSE:ETN) is the least popular one with only 36 bullish hedge fund positions. Monster Beverage Corporation (NASDAQ:MNST) 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 MNST wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MNST investors were disappointed as the stock returned -9% 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 (see the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
