We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Keurig Dr Pepper Inc. (NYSE:KDP).
Is Keurig Dr Pepper Inc. (NYSE:KDP) a marvelous investment now? The best stock pickers are becoming less hopeful. The number of bullish hedge fund bets dropped by 1 recently. Our calculations also showed that KDP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). KDP was in 20 hedge funds' portfolios at the end of September. There were 21 hedge funds in our database with KDP positions at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
To the average investor there are plenty of tools stock traders use to evaluate publicly traded companies. A duo of the less utilized tools are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outperform the S&P 500 by a very impressive amount (see the details here).
[caption id="attachment_365194" align="aligncenter" width="450"] David E. Shaw of D.E. Shaw[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the recent hedge fund action surrounding Keurig Dr Pepper Inc. (NYSE:KDP).
How are hedge funds trading Keurig Dr Pepper Inc. (NYSE:KDP)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KDP over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cedar Rock Capital was the largest shareholder of Keurig Dr Pepper Inc. (NYSE:KDP), with a stake worth $260.5 million reported as of the end of September. Trailing Cedar Rock Capital was D E Shaw, which amassed a stake valued at $158.4 million. Levin Easterly Partners, Citadel Investment Group, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cedar Rock Capital allocated the biggest weight to Keurig Dr Pepper Inc. (NYSE:KDP), around 6.04% of its 13F portfolio. Levin Easterly Partners is also relatively very bullish on the stock, earmarking 2.53 percent of its 13F equity portfolio to KDP.
Because Keurig Dr Pepper Inc. (NYSE:KDP) has faced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few hedgies who were dropping their entire stakes heading into Q4. At the top of the heap, Steve Cohen's Point72 Asset Management dropped the biggest position of all the hedgies followed by Insider Monkey, totaling close to $1.2 million in stock, and Philippe Laffont's Coatue Management was right behind this move, as the fund said goodbye to about $0.9 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Keurig Dr Pepper Inc. (NYSE:KDP) but similarly valued. We will take a look at FedEx Corporation (NYSE:FDX), National Grid plc (NYSE:NGG), Dell Technologies Inc. (NYSE:DELL), and Pinduoduo Inc. (NASDAQ:PDD). This group of stocks' market caps resemble KDP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FDX,40,1369398,0 NGG,10,534812,2 DELL,45,2444313,5 PDD,30,1435122,1 Average,31.25,1445911,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $1446 million. That figure was $670 million in KDP's case. Dell Technologies Inc. (NYSE:DELL) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 10 bullish hedge fund positions. Keurig Dr Pepper Inc. (NYSE:KDP) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on KDP as the stock returned 13.9% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.