How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Molson Coors Beverage Company (NYSE:TAP).
Is Molson Coors Beverage Company (NYSE:TAP) a marvelous investment right now? The best stock pickers were taking an optimistic view. The number of long hedge fund positions advanced by 2 in recent months. Molson Coors Beverage Company (NYSE:TAP) was in 36 hedge funds’ portfolios at the end of June. The all time high for this statistics is 70. Our calculations also showed that TAP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 34 hedge funds in our database with TAP holdings at the end of March.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most market participants, hedge funds are assumed to be unimportant, old investment vehicles of yesteryear. While there are more than 8000 funds trading today, Our researchers hone in on the leaders of this group, around 850 funds. These investment experts watch over most of the smart money’s total capital, and by watching their matchless picks, Insider Monkey has brought to light a number of investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind we’re going to review the fresh hedge fund action regarding Molson Coors Beverage Company (NYSE:TAP).
How are hedge funds trading Molson Coors Beverage Company (NYSE:TAP)?
At the end of June, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TAP over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in Molson Coors Beverage Company (NYSE:TAP) was held by AQR Capital Management, which reported holding $55.8 million worth of stock at the end of June. It was followed by Nitorum Capital with a $30.1 million position. Other investors bullish on the company included Diamond Hill Capital, Citadel Investment Group, and Fairpointe Capital. In terms of the portfolio weights assigned to each position Fairpointe Capital allocated the biggest weight to Molson Coors Beverage Company (NYSE:TAP), around 3.13% of its 13F portfolio. Hi-Line Capital Management is also relatively very bullish on the stock, earmarking 1.61 percent of its 13F equity portfolio to TAP.
As one would reasonably expect, key money managers were breaking ground themselves. Fairpointe Capital, managed by Thyra Zerhusen, established the most outsized position in Molson Coors Beverage Company (NYSE:TAP). Fairpointe Capital had $21.5 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $14.4 million investment in the stock during the quarter. The following funds were also among the new TAP investors: Brandon Haley’s Holocene Advisors, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Donald Sussman’s Paloma Partners.
Let’s now review hedge fund activity in other stocks similar to Molson Coors Beverage Company (NYSE:TAP). We will take a look at Gaming and Leisure Properties Inc (NASDAQ:GLPI), Melco Resorts & Entertainment Limited (NASDAQ:MLCO), Ally Financial Inc (NYSE:ALLY), Credit Acceptance Corp. (NASDAQ:CACC), Livongo Health, Inc. (NASDAQ:LVGO), Formula One Group (NASDAQ:FWONK), and WestRock Company (NYSE:WRK). All of these stocks’ market caps are closest to TAP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLPI | 35 | 498974 | 0 |
| MLCO | 32 | 610443 | 4 |
| ALLY | 54 | 1635686 | 9 |
| CACC | 23 | 985846 | 1 |
| LVGO | 36 | 338665 | 19 |
| FWONK | 49 | 1402496 | 12 |
| WRK | 32 | 461872 | 6 |
| Average | 37.3 | 847712 | 7.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.3 hedge funds with bullish positions and the average amount invested in these stocks was $848 million. That figure was $274 million in TAP’s case. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand Credit Acceptance Corp. (NASDAQ:CACC) is the least popular one with only 23 bullish hedge fund positions. Molson Coors Beverage Company (NYSE:TAP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TAP is 43.4. 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and surpassed the market again by 20.1 percentage points. Unfortunately TAP wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); TAP investors were disappointed as the stock returned 2.6% since the end of June (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
