We at Insider Monkey have gone over 730 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 June 28th. In this article, we look at what those funds think of Keurig Dr Pepper Inc. (NYSE:KDP) based on that data.
Is Keurig Dr Pepper Inc. (NYSE:KDP) the right investment to pursue these days? Prominent investors are in a bearish mood. The number of long hedge fund bets were trimmed by 1 recently. Our calculations also showed that KDP isn't among the 30 most popular stocks among hedge funds (see the video below). KDP was in 21 hedge funds' portfolios at the end of June. There were 22 hedge funds in our database with KDP holdings at the end of the previous quarter. Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the new hedge fund action encompassing Keurig Dr Pepper Inc. (NYSE:KDP).
What have hedge funds been doing with Keurig Dr Pepper Inc. (NYSE:KDP)?
Heading into the third quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in KDP a year ago. With hedgies' capital changing hands, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
Among these funds, Cedar Rock Capital held the most valuable stake in Keurig Dr Pepper Inc. (NYSE:KDP), which was worth $297.3 million at the end of the second quarter. On the second spot was D E Shaw which amassed $276.8 million worth of shares. Moreover, Citadel Investment Group, Soros Fund Management, and Balyasny Asset Management were also bullish on Keurig Dr Pepper Inc. (NYSE:KDP), allocating a large percentage of their portfolios to this stock.
Seeing as Keurig Dr Pepper Inc. (NYSE:KDP) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers that elected to cut their positions entirely by the end of the second quarter. At the top of the heap, Israel Englander's Millennium Management dumped the largest position of the "upper crust" of funds monitored by Insider Monkey, comprising about $5.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also sold off its stock, about $4.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks similar to Keurig Dr Pepper Inc. (NYSE:KDP). We will take a look at Applied Materials, Inc. (NASDAQ:AMAT), Baidu, Inc. (NASDAQ:BIDU), Baxter International Inc. (NYSE:BAX), and FedEx Corporation (NYSE:FDX). This group of stocks' market values resemble KDP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMAT,44,1996991,2 BIDU,44,1822939,-9 BAX,34,2818359,4 FDX,40,1808917,-1 Average,40.5,2111802,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.5 hedge funds with bullish positions and the average amount invested in these stocks was $2112 million. That figure was $700 million in KDP's case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand Baxter International Inc. (NYSE:BAX) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks Keurig Dr Pepper Inc. (NYSE:KDP) is even less popular than BAX. Hedge funds dodged a bullet by taking a bearish stance towards KDP. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately KDP wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); KDP investors were disappointed as the stock returned -4.5% during the third 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.