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Is New Age Beverages Corporation (NBEV) Going to Burn These Hedge Funds?

Debasis Saha

We at Insider Monkey have gone over 752 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of New Age Beverages Corporation (NASDAQ:NBEV) based on that data.

Is New Age Beverages Corporation (NASDAQ:NBEV) a healthy stock for your portfolio? The smart money is betting on the stock. The number of bullish hedge fund positions moved up by 2 lately. Our calculations also showed that NBEV isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). NBEV was in 6 hedge funds' portfolios at the end of the third quarter of 2019. There were 4 hedge funds in our database with NBEV positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_27480" align="alignnone" width="600"] Israel Englander of Millennium Management[/caption]

Izzy Englander of MILLENNIUM MANAGEMENT

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to review the new hedge fund action encompassing New Age Beverages Corporation (NASDAQ:NBEV).

How are hedge funds trading New Age Beverages Corporation (NASDAQ:NBEV)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from one quarter earlier. By comparison, 1 hedge funds held shares or bullish call options in NBEV a year ago. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Is NBEV A Good Stock To Buy?

The largest stake in New Age Beverages Corporation (NASDAQ:NBEV) was held by Sculptor Capital, which reported holding $0.7 million worth of stock at the end of September. It was followed by Millennium Management with a $0.2 million position. Other investors bullish on the company included AQR Capital Management, Winton Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Sculptor Capital allocated the biggest weight to New Age Beverages Corporation (NASDAQ:NBEV), around 0.01% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.001 percent of its 13F equity portfolio to NBEV.

With a general bullishness amongst the heavyweights, key money managers have jumped into New Age Beverages Corporation (NASDAQ:NBEV) headfirst. AQR Capital Management, managed by Cliff Asness, assembled the biggest position in New Age Beverages Corporation (NASDAQ:NBEV). AQR Capital Management had $0.2 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also made a $0 million investment in the stock during the quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as New Age Beverages Corporation (NASDAQ:NBEV) but similarly valued. We will take a look at Monroe Capital Corp (NASDAQ:MRCC), Bankwell Financial Group, Inc. (NASDAQ:BWFG), Tuscan Holdings Corp. II (NASDAQ:THCA), and Saratoga Investment Corp (NYSE:SAR). This group of stocks' market valuations are closest to NBEV's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MRCC,6,2832,2 BWFG,6,45471,1 THCA,9,31142,9 SAR,5,6996,3 Average,6.5,21610,3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $1 million in NBEV's case. Tuscan Holdings Corp. II (NASDAQ:THCA) is the most popular stock in this table. On the other hand Saratoga Investment Corp (NYSE:SAR) is the least popular one with only 5 bullish hedge fund positions. New Age Beverages Corporation (NASDAQ:NBEV) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NBEV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NBEV investors were disappointed as the stock returned -21.7% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.

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

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