Is Starbucks Corporation (SBUX) A Good Stock To Buy?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Starbucks Corporation (NASDAQ:SBUX).

Starbucks Corporation (NASDAQ:SBUX) was in 54 hedge funds’ portfolios at the end of September. SBUX investors should be aware of an increase in support from the world’s most elite money managers in recent months. There were 46 hedge funds in our database with SBUX holdings at the end of the previous quarter. At the end of this article we will also compare SBUX to other stocks including Vodafone Group Plc (ADR) (NASDAQ:VOD), GlaxoSmithKline plc (ADR) (NYSE:GSK), and NIKE, Inc. (NYSE:NKE) to get a better sense of its popularity.

Now, let’s review the fresh action encompassing Starbucks Corporation (NASDAQ:SBUX).

How have hedgies been trading Starbucks Corporation (NASDAQ:SBUX)?

At the end of the third quarter, a total of 54 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Starbucks Corporation (NASDAQ:SBUX). Arrowstreet Capital has a $385.2 million position in the stock, comprising 1.8% of its 13F portfolio. The second largest stake is held by Columbus Circle Investors, with a $213.9 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of Phill Gross and Robert Atchinson’s Adage Capital Management, Steve Cohen’s Point72 Asset Management and David Stemerman’s Conatus Capital Management.

As aggregate interest increased, key hedge funds were breaking ground themselves. Discovery Capital Management, managed by Rob Citrone, initiated the most valuable position in Starbucks Corporation (NASDAQ:SBUX). Discovery Capital Management had $61.2 million invested in the company at the end of the quarter. Edmond M. Safra’s EMS Capital also made a $40.9 million investment in the stock during the quarter. The following funds were also among the new SBUX investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, John Overdeck and David Siegel’s Two Sigma Advisors, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s also examine hedge fund activity in other stocks similar to Starbucks Corporation (NASDAQ:SBUX). We will take a look at Vodafone Group Plc (ADR) (NASDAQ:VOD), GlaxoSmithKline plc (ADR) (NYSE:GSK), NIKE, Inc. (NYSE:NKE), and Lloyds Banking Group PLC (ADR) (NYSE:LYG). This group of stocks’ market valuations resemble SBUX’s market valuation.

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1664 million. That figure was $1716 million in SBUX’s case. NIKE, Inc. (NYSE:NKE) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (ADR) (NYSE:LYG) is the least popular one with only 8 bullish hedge fund positions. Starbucks Corporation (NASDAQ:SBUX) 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. In this regard NKE might be a better candidate to consider a long position.