In this article we will take a look at whether hedge funds think Reed's, Inc. (NASDAQ:REED) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Reed's, Inc. (NASDAQ:REED) has experienced an increase in hedge fund interest lately. REED was in 6 hedge funds' portfolios at the end of March. There were 4 hedge funds in our database with REED positions at the end of the previous quarter. Our calculations also showed that REED 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_842657" align="aligncenter" width="393"] Rudolph Kluiber Of GRT Capital Partners[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to view the key hedge fund action encompassing Reed's, Inc. (NASDAQ:REED).
How are hedge funds trading Reed's, Inc. (NASDAQ:REED)?
At Q1's end, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the fourth quarter of 2019. By comparison, 4 hedge funds held shares or bullish call options in REED 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.
When looking at the institutional investors followed by Insider Monkey, Constantinos J. Christofilis's Archon Capital Management has the most valuable position in Reed's, Inc. (NASDAQ:REED), worth close to $0.4 million, amounting to 0.1% of its total 13F portfolio. The second most bullish fund manager is Royce & Associates, managed by Chuck Royce, which holds a $0.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk's GRT Capital Partners, Ken Griffin's Citadel Investment Group and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Archon Capital Management allocated the biggest weight to Reed's, Inc. (NASDAQ:REED), around 0.15% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, earmarking 0.09 percent of its 13F equity portfolio to REED.
Now, key hedge funds were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the biggest position in Reed's, Inc. (NASDAQ:REED). Millennium Management had $0 million invested in the company at the end of the quarter. Andrew Hahn's Ursa Fund Management also initiated a $0 million position during the quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Reed's, Inc. (NASDAQ:REED) but similarly valued. We will take a look at The L.S. Starrett Company (NYSE:SCX), Golden Minerals Co (NYSE:AUMN), Chaparral Energy, Inc. (NYSE:CHAP), and HyreCar Inc. (NASDAQ:HYRE). This group of stocks' market values resemble REED's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SCX,4,2952,0 AUMN,1,3,0 CHAP,7,10978,0 HYRE,5,5076,-1 Average,4.25,4752,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $1 million in REED's case. Chaparral Energy, Inc. (NYSE:CHAP) is the most popular stock in this table. On the other hand Golden Minerals Co (NYSE:AUMN) is the least popular one with only 1 bullish hedge fund positions. Reed's, Inc. (NASDAQ:REED) is not the most popular stock in this group but hedge fund interest is still above 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on REED as the stock returned 127.1% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.