We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Anheuser-Busch InBev SA/NV (NYSE:BUD).
Is Anheuser-Busch InBev SA/NV (NYSE:BUD) a bargain? Prominent investors are getting less optimistic. The number of long hedge fund bets fell by 1 in recent months. Our calculations also showed that BUD isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a look at the latest hedge fund action surrounding Anheuser-Busch InBev SA/NV (NYSE:BUD).
How have hedgies been trading Anheuser-Busch InBev SA/NV (NYSE:BUD)?
At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in BUD at the beginning of this year. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Anheuser-Busch InBev SA/NV (NYSE:BUD) was held by Gardner Russo & Gardner, which reported holding $704.3 million worth of stock at the end of September. It was followed by Fisher Asset Management with a $564.5 million position. Other investors bullish on the company included Maverick Capital, Citadel Investment Group, and Millennium Management.
Because Anheuser-Busch InBev SA/NV (NYSE:BUD) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds who sold off their full holdings by the end of the third quarter. Intriguingly, Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $856.5 million in stock, and Andreas Halvorsen’s Viking Global was right behind this move, as the fund dumped about $279 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Anheuser-Busch InBev SA/NV (NYSE:BUD) but similarly valued. We will take a look at NVIDIA Corporation (NASDAQ:NVDA), TOTAL S.A. (NYSE:TOT), Netflix, Inc. (NASDAQ:NFLX), and Comcast Corporation (NASDAQ:CMCSA). This group of stocks’ market valuations are similar to BUD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVDA | 56 | 4087785 | -1 |
| TOT | 13 | 1101532 | 0 |
| NFLX | 84 | 8777233 | 18 |
| CMCSA | 92 | 6570496 | -1 |
| Average | 61.25 | 5134262 | 4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 61.25 hedge funds with bullish positions and the average amount invested in these stocks was $5.13 billion. That figure was $1.61 billion in BUD’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand TOTAL S.A. (NYSE:TOT) is the least popular one with only 13 bullish hedge fund positions. Anheuser-Busch InBev SA/NV (NYSE:BUD) 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. In this regard CMCSA might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
