Were Hedge Funds Right About National Beverage Corp. (FIZZ)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded National Beverage Corp. (NASDAQ:FIZZ) and determine whether the smart money was really smart about this stock.

National Beverage Corp. (NASDAQ:FIZZ) shareholders have witnessed a decrease in hedge fund sentiment in recent months. Our calculations also showed that FIZZ isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

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 S&P 500 ETFs by more than 58 percentage points since March 2017 (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 stocks that are in our short portfolio.

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a look at the fresh hedge fund action regarding National Beverage Corp. (NASDAQ:FIZZ).

How have hedgies been trading National Beverage Corp. (NASDAQ:FIZZ)?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in FIZZ a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Renaissance Technologies was the largest shareholder of National Beverage Corp. (NASDAQ:FIZZ), with a stake worth $112.9 million reported as of the end of September. Trailing Renaissance Technologies was Yost Capital Management, which amassed a stake valued at $17.2 million. GMT Capital, GAMCO Investors, and SG 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 Yost Capital Management allocated the biggest weight to National Beverage Corp. (NASDAQ:FIZZ), around 16.25% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, dishing out 3.41 percent of its 13F equity portfolio to FIZZ.

Judging by the fact that National Beverage Corp. (NASDAQ:FIZZ) has experienced bearish sentiment from hedge fund managers, we can see that there lies a certain “tier” of hedge funds that slashed their full holdings last quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management cut the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling about $19 million in stock. Minhua Zhang’s fund, Weld Capital Management, also said goodbye to its stock, about $1.2 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to National Beverage Corp. (NASDAQ:FIZZ). We will take a look at Stepan Company (NYSE:SCL), BancorpSouth Bank (NYSE:BXS), Investors Bancorp, Inc. (NASDAQ:ISBC), and Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN). All of these stocks’ market caps resemble FIZZ’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $202 million in FIZZ’s case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand Stepan Company (NYSE:SCL) is the least popular one with only 10 bullish hedge fund positions. National Beverage Corp. (NASDAQ:FIZZ) is not the least popular stock in this group but hedge fund interest is still below average. 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on FIZZ as the stock returned 61.2% since the end of March and outperformed the market by an even larger margin.

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