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Hedge Funds Are Selling Keurig Dr Pepper Inc. (KDP)

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In this article we will check out the progression of hedge fund sentiment towards Keurig Dr Pepper Inc. (NASDAQ:KDP) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Keurig Dr Pepper Inc. (NASDAQ:KDP) investors should be aware of a decrease in hedge fund interest in recent months. Keurig Dr Pepper Inc. (NASDAQ:KDP) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistic is 41. Our calculations also showed that KDP isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we're going to go over the new hedge fund action encompassing Keurig Dr Pepper Inc. (NASDAQ:KDP).

Do Hedge Funds Think KDP Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards KDP over the last 24 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is KDP A Good Stock To Buy?
Is KDP A Good Stock To Buy?

The largest stake in Keurig Dr Pepper Inc. (NASDAQ:KDP) was held by Cedar Rock Capital, which reported holding $346.4 million worth of stock at the end of June. It was followed by Arrowstreet Capital with a $274.7 million position. Other investors bullish on the company included Renaissance Technologies, Balyasny Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Cedar Rock Capital allocated the biggest weight to Keurig Dr Pepper Inc. (NASDAQ:KDP), around 7.89% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, dishing out 1.55 percent of its 13F equity portfolio to KDP.

Since Keurig Dr Pepper Inc. (NASDAQ:KDP) has experienced declining sentiment from the smart money, logic holds that there was a specific group of hedge funds that elected to cut their full holdings by the end of the second quarter. Interestingly, Simon Sadler's Segantii Capital said goodbye to the biggest position of the 750 funds tracked by Insider Monkey, worth about $22.3 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also dropped its stock, about $15.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 2 funds by the end of the second quarter.

Let's also examine hedge fund activity in other stocks similar to Keurig Dr Pepper Inc. (NASDAQ:KDP). We will take a look at The Kraft Heinz Company (NASDAQ:KHC), Prudential Public Limited Company (NYSE:PUK), Southern Copper Corporation (NYSE:SCCO), KLA Corporation (NASDAQ:KLAC), America Movil SAB de CV (NYSE:AMX), América Móvil, S.A.B. de C.V. (NYSE:AMOV), and Roper Technologies Inc. (NYSE:ROP). This group of stocks' market valuations resemble KDP's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KHC,33,13577456,0 PUK,4,9037,2 SCCO,23,552258,-4 KLAC,45,1374639,5 AMX,13,114474,-2 AMOV,1,256,0 ROP,41,1570401,-1 Average,22.9,2456932,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $2457 million. That figure was $1197 million in KDP's case. KLA Corporation (NASDAQ:KLAC) is the most popular stock in this table. On the other hand América Móvil, S.A.B. de C.V. (NYSE:AMOV) is the least popular one with only 1 bullish hedge fund positions. Keurig Dr Pepper Inc. (NASDAQ:KDP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KDP is 54.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately KDP wasn't nearly as popular as these 5 stocks and hedge funds that were betting on KDP were disappointed as the stock returned 0.7% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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