Anheuser-Busch InBev (BUD): Were Hedge Funds Right About This Stock?
We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's take a look at whether Anheuser-Busch InBev SA/NV (NYSE:BUD) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Anheuser-Busch InBev SA/NV (NYSE:BUD) a buy, sell, or hold? Money managers are in a bullish mood. The number of long hedge fund positions advanced by 2 recently. Our calculations also showed that BUD isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). BUD was in 23 hedge funds' portfolios at the end of the fourth quarter of 2019. There were 21 hedge funds in our database with BUD holdings at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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George Soros of Soros Fund Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's review the latest hedge fund action surrounding Anheuser-Busch InBev SA/NV (NYSE:BUD).
What does smart money think about Anheuser-Busch InBev SA/NV (NYSE:BUD)?
Heading into the first quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in BUD a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Tom Russo's Gardner Russo & Gardner has the biggest position in Anheuser-Busch InBev SA/NV (NYSE:BUD), worth close to $618.2 million, comprising 4.7% of its total 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, managed by Ken Fisher, which holds a $576.6 million position; 0.6% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism contain Renaissance Technologies, Shane Finemore's Manikay Partners and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Manikay Partners allocated the biggest weight to Anheuser-Busch InBev SA/NV (NYSE:BUD), around 4.96% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, setting aside 4.74 percent of its 13F equity portfolio to BUD.
Consequently, some big names were breaking ground themselves. Steadfast Capital Management, managed by Robert Pitts, created the most valuable position in Anheuser-Busch InBev SA/NV (NYSE:BUD). Steadfast Capital Management had $6.3 million invested in the company at the end of the quarter. George Soros's Soros Fund Management also initiated a $4.1 million position during the quarter. The other funds with new positions in the stock are Matthew Tewksbury's Stevens Capital Management, Parvinder Thiara's Athanor Capital, and Jonathan Esfandi's JNE Partners.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Anheuser-Busch InBev SA/NV (NYSE:BUD) but similarly valued. These stocks are Adobe Inc. (NASDAQ:ADBE), HSBC Holdings plc (NYSE:HSBC), NIKE, Inc. (NYSE:NKE), and Abbott Laboratories (NYSE:ABT). This group of stocks' market valuations resemble BUD's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ADBE,106,9784116,4 HSBC,18,1118976,2 NKE,81,2510260,12 ABT,62,2055531,-3 Average,66.75,3867221,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 66.75 hedge funds with bullish positions and the average amount invested in these stocks was $3867 million. That figure was $1479 million in BUD's case. Adobe Inc. (NASDAQ:ADBE) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 18 bullish hedge fund positions. Anheuser-Busch InBev SA/NV (NYSE:BUD) 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 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately BUD wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BUD investors were disappointed as the stock returned -45.4% 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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