Was The Smart Money Right About Monster Beverage Corp (MNST)?

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 Monster Beverage Corp (NASDAQ:MNST).

Monster Beverage Corp (NASDAQ:MNST) investors should pay attention to an increase in hedge fund interest lately. Monster Beverage Corp (NASDAQ:MNST) was in 46 hedge funds’ portfolios at the end of June. The all time high for this statistic is 50. Our calculations also showed that MNST isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Today there are dozens of indicators investors can use to size up their holdings. A pair of the most innovative indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce the S&P 500 by a solid margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV 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 we’re going to take a look at the new hedge fund action surrounding Monster Beverage Corp (NASDAQ:MNST).

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

Heading into the third quarter of 2021, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from one quarter earlier. By comparison, 35 hedge funds held shares or bullish call options in MNST a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Monster Beverage Corp (NASDAQ:MNST), which was worth $655.7 million at the end of the second quarter. On the second spot was Broadwood Capital which amassed $425.4 million worth of shares. Arrowstreet Capital, AQR Capital Management, and Marshall Wace LLP 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 Broadwood Capital allocated the biggest weight to Monster Beverage Corp (NASDAQ:MNST), around 19.01% of its 13F portfolio. Lakehouse Capital is also relatively very bullish on the stock, dishing out 8.69 percent of its 13F equity portfolio to MNST.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Incline Global Management, managed by Jeff Lignelli, initiated the most outsized position in Monster Beverage Corp (NASDAQ:MNST). Incline Global Management had $41.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $5.5 million position during the quarter. The following funds were also among the new MNST investors: Graham F. Smith’s Franklin Street Capital, Andrew Weiss’s Weiss Asset Management, and Qing Li’s Sciencast Management.

Let’s also examine hedge fund activity in other stocks similar to Monster Beverage Corp (NASDAQ:MNST). These stocks are eBay Inc (NASDAQ:EBAY), Marvell Technology, Inc. (NASDAQ:MRVL), Vodafone Group Plc (NASDAQ:VOD), Veeva Systems Inc (NYSE:VEEV), Dow Inc. (NYSE:DOW), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), and Bilibili Inc. (NASDAQ:BILI). This group of stocks’ market values are closest to MNST’s market value.

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As you can see these stocks had an average of 35.6 hedge funds with bullish positions and the average amount invested in these stocks was $1335 million. That figure was $2311 million in MNST’s case. Marvell Technology, Inc. (NASDAQ:MRVL) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 11 bullish hedge fund positions. Monster Beverage Corp (NASDAQ:MNST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MNST 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. This is a slightly positive signal but 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 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately MNST wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MNST were disappointed as the stock returned 0.3% since the end of June (through 11/5) 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 many of these stocks already outperformed the market since 2019.

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