Is STZ A Good Stock To Buy Now?

After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Constellation Brands, Inc. (NYSE:STZ).

Is STZ a good stock to buy now? Hedge fund interest in Constellation Brands, Inc. (NYSE:STZ) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that STZ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). 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 eBay Inc (NASDAQ:EBAY), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), and Xcel Energy Inc (NASDAQ:XEL) to gather more data points.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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Michael Lowenstein of Kensico Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let’s view the fresh hedge fund action surrounding Constellation Brands, Inc. (NYSE:STZ).

What does smart money think about Constellation Brands, Inc. (NYSE:STZ)?

At Q3’s end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards STZ over the last 21 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

More specifically, Kensico Capital was the largest shareholder of Constellation Brands, Inc. (NYSE:STZ), with a stake worth $832.3 million reported as of the end of September. Trailing Kensico Capital was Palestra Capital Management, which amassed a stake valued at $223.6 million. Citadel Investment Group, Two Sigma Advisors, and Two Creeks Capital Management 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 Kensico Capital allocated the biggest weight to Constellation Brands, Inc. (NYSE:STZ), around 18.21% of its 13F portfolio. BlueDrive Global Investors is also relatively very bullish on the stock, setting aside 9.78 percent of its 13F equity portfolio to STZ.

Since Constellation Brands, Inc. (NYSE:STZ) has witnessed falling interest from the smart money, we can see that there lies a certain “tier” of fund managers who were dropping their positions entirely last quarter. At the top of the heap, Dennis Goldstein’s Rip Road Capital dumped the largest position of all the hedgies tracked by Insider Monkey, valued at about $7.1 million in stock. Donald Sussman’s fund, Paloma Partners, also cut its stock, about $3.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Constellation Brands, Inc. (NYSE:STZ). We will take a look at eBay Inc (NASDAQ:EBAY), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), Xcel Energy Inc (NASDAQ:XEL), The Blackstone Group Inc. (NYSE:BX), SBA Communications Corporation (NASDAQ:SBAC), Las Vegas Sands Corp. (NYSE:LVS), and Baidu, Inc. (NASDAQ:BIDU). All of these stocks’ market caps match STZ’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.6 hedge funds with bullish positions and the average amount invested in these stocks was $1943 million. That figure was $2196 million in STZ’s case. eBay Inc (NASDAQ:EBAY) is the most popular stock in this table. On the other hand Xcel Energy Inc (NASDAQ:XEL) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Constellation Brands, Inc. (NYSE:STZ) is more popular among hedge funds. Our overall hedge fund sentiment score for STZ is 77.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Unfortunately STZ wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on STZ were disappointed as the stock returned 8.6% since the end of the third quarter (through 12/2) 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 among hedge funds as most of these stocks already outperformed the market in 2020.

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