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5 of Cerebellum Capital’s Most Intriguing Q3 Stock Picks

Tim Frederick
·5 min read

David Andre and Astro Teller’s Cerebellum Capital is a fascinating hedge fund to track given the massive portfolio turnover it undertakes every quarter. The fund, which was founded in April 2017 and is currently being run by CEO Conrad Gann, uses advanced machine learning that can autonomously discover and implement its own strategies, helping the fund uncover stocks that are likely to excel in the near future.

The fund aims to deliver 8% net returns annually but has failed to achieve that mark in each of its first three years. Its maiden year saw returns of 6.70%, which dropped to just a smidge above flat returns in 2018 at 0.08%. 2.89% returns in 2019 gave way to immense difficulty alongside much of the market during the first quarter of 2020, as the pandemic blindsided Cerebellum’s machine learning strategies, leaving the fund with 16.33% Q1 losses.

At the end of Q3 2020, 221 of Cerebellum’s 378 13F positions were added during the quarter, while 314 of the 471 holdings it owned at the end of Q2 were sold off during Q3. Despite the high quarterly turnover, Cerebellum Capital’s sector allocation tends to stay within similar ranges, with consumer discretionary, finance and tech stocks generally being among its favorites.

Let’s check out five of the more intriguing additions to Cerebellum’s portfolio in Q3, which may represent interesting short-term additions to your own portfolio.

harley, helmet, vehicle,
harley, helmet, vehicle,

Adriano Castelli / Shutterstock.com

Stocks Added to Cerebellum Capital’s Portfolio in Q3

Yelp

Hedge fund ownership of Yelp Inc (NYSE:YELP) declined by 33% between mid-2016 and the end of 2017, and has remained at depressed levels since then. That didn’t stop Cerebellum Capital from taking the plunge in Q3 with Yelp shares still down by around 40% year-to-date. Yelp will need a stronger economic recovery (and possibly a Covid-19 vaccine) to help drive more traffic to small businesses and spark a renewed interest in its platform.

Zillow

Hedge funds were big fans of Zillow Group Inc (NASDAQ:Z) during Q2, as ownership of the stock jumped by 59% among the funds tracked by Insider Monkey. Cerebellum Capital jumped aboard the Zillow train in Q3, joining the growing group of happy investors who own one of 2020’s best performing stocks. Zillow shares have gained over 115% this year on the strength of a surprisingly strong housing market and soaring demand for its online real estate listings platform.

Coca-Cola European Partners

Hedge fund interest in Coca-Cola European Partners plc (NYSE:CCEP) has picked up over the last year after crashing by 75% between the middle of 2016 and the middle of 2019. The standalone company that is responsible for the bottling, distribution and marketing of The Coca-Cola Company (NYSE:KO)’s products has just taken a big step to expand its presence in the southern hemisphere, buying Australian bottler Coca-Cola Amatil for A$9.23 billion ($6.6 billion).

Harley-Davidson

Hedge funds were getting revved up about Harley-Davidson, Inc. (NYSE:HOG) in Q2, with a 76% surge in ownership of the motorcycle manufacturer among the funds tracked by Insider Monkey. That trend may be continuing in Q3, with Cerebellum Capital also buying HOG shares. Robert Bishop’s Impala Asset Management, which has an activist stake in Harley-Davidson and helped oust the company’s former leader Matt Levatich, has been impressed with the work of new CEO Jochen Zeist, with Bishop saying that the company is on the right track for the first time in several years.

Monster Beverage

Monster Beverage Corp (NASDAQ:MNST) has been a popular stock among the hedge funds tracked by Insider Monkey over the past year, reaching record ownership at the end of 2019. Things changed in Q2 however, as 19% of hedge fund shareholders sold off MNST, including Steve Cohen’s Point72 Asset Management. The energy drink company’s gross sales plummeted by 22% in April, which may have spooked some hedge fund managers. Despite that, Monster Beverage did hold up reasonably well in Q2, with sales of $1.09 billion and earnings of $0.59 both topping estimates.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We go through lists like the 10 most profitable companies in America 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. You can subscribe to our free enewsletter below to receive our stories in your inbox:

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