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Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Ambev SA (NYSE:ABEV) based on that data.
Is Ambev SA (NYSE:ABEV) the right investment to pursue these days? Money managers are getting less bullish. The number of bullish hedge fund positions went down by 5 in recent months. Our calculations also showed that ABEV isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are many formulas stock market investors put to use to appraise stocks. A pair of the most underrated formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the top hedge fund managers can beat the broader indices by a solid amount (see the details here).
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Jim Simons of Renaissance Technologies[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we're going to take a look at the recent hedge fund action encompassing Ambev SA (NYSE:ABEV).
Hedge fund activity in Ambev SA (NYSE:ABEV)
At the end of the fourth quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ABEV over the last 18 quarters. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Ambev SA (NYSE:ABEV) was held by Renaissance Technologies, which reported holding $193 million worth of stock at the end of September. It was followed by Ako Capital with a $182.2 million position. Other investors bullish on the company included Fisher Asset Management, Citadel Investment Group, and AQR Capital Management. In terms of the portfolio weights assigned to each position Ako Capital allocated the biggest weight to Ambev SA (NYSE:ABEV), around 3.92% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, setting aside 2.68 percent of its 13F equity portfolio to ABEV.
Judging by the fact that Ambev SA (NYSE:ABEV) has witnessed a decline in interest from the smart money, it's easy to see that there exists a select few fund managers that slashed their positions entirely heading into Q4. Intriguingly, Nicolai Tangen's Ako Capital dropped the biggest position of the "upper crust" of funds followed by Insider Monkey, totaling an estimated $160.4 million in stock, and Ken Heebner's Capital Growth Management was right behind this move, as the fund dropped about $38.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 5 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to Ambev SA (NYSE:ABEV). We will take a look at CME Group Inc (NASDAQ:CME), Banco Bradesco SA (NYSE:BBD), ConocoPhillips (NYSE:COP), and Chubb Limited (NYSE:CB). This group of stocks' market valuations are closest to ABEV's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CME,54,2402338,2 BBD,18,661816,1 COP,62,2437765,-8 CB,24,588256,-3 Average,39.5,1522544,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $1523 million. That figure was $548 million in ABEV's case. ConocoPhillips (NYSE:COP) is the most popular stock in this table. On the other hand Banco Bradesco SA (NYSE:BBD) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Ambev SA (NYSE:ABEV) is even less popular than BBD. Hedge funds dodged a bullet by taking a bearish stance towards ABEV. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately ABEV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ABEV investors were disappointed as the stock returned -38.8% during the same time period 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 most of these stocks already outperformed the market so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.