Is Reed’s, Inc. (REED) A Good Stock To Buy?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Reed’s, Inc. (NASDAQ:REED), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is REED a good stock to buy? Reed’s, Inc. (NASDAQ:REED) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that REED isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as TransAct Technologies Incorporated (NASDAQ:TACT), American River Bankshares (NASDAQ:AMRB), and Corenergy Infrastructure Trust Inc (NYSE:CORR) to gather more data points.

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 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Algert of Algert Global

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $28 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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. 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. Keeping this in mind let’s go over the recent hedge fund action regarding Reed’s, Inc. (NASDAQ:REED).

Do Hedge Funds Think REED Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards REED over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Chuck Royce’s Royce & Associates has the largest position in Reed’s, Inc. (NASDAQ:REED), worth close to $4.8 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund is Renaissance Technologies, with a $1.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions contain Peter Algert’s Algert Global, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Reed’s, Inc. (NASDAQ:REED), around 0.03% of its 13F portfolio. Algert Global is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to REED.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Algert Global).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Reed’s, Inc. (NASDAQ:REED) but similarly valued. These stocks are TransAct Technologies Incorporated (NASDAQ:TACT), American River Bankshares (NASDAQ:AMRB), Corenergy Infrastructure Trust Inc (NYSE:CORR), Lumos Pharma, Inc. (NASDAQ:LUMO), OpGen, Inc. (NASDAQ:OPGN), CLPS Incorporation (NASDAQ:CLPS), and AstroNova, Inc. (NASDAQ:ALOT). This group of stocks’ market values resemble REED’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.1 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $6 million in REED’s case. TransAct Technologies Incorporated (NASDAQ:TACT) is the most popular stock in this table. On the other hand American River Bankshares (NASDAQ:AMRB) is the least popular one with only 1 bullish hedge fund positions. Reed’s, Inc. (NASDAQ:REED) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for REED is 50. 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. 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 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 17.2% in 2021 through June 11th and surpassed the market again by 3.3 percentage points. Unfortunately REED wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); REED investors were disappointed as the stock returned -12.8% since the end of March (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

Disclosure: None. This article was originally published at Insider Monkey.