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Hedge Funds Are Warming Up To Ambev SA (ABEV)

Nina Todic

Is Ambev SA (NYSE:ABEV) a good equity to bet on 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 Ambev SA (NYSE:ABEV) going to take off soon? Hedge funds are in an optimistic mood. The number of long hedge fund bets rose by 3 recently. Our calculations also showed that ABEV isn't among the 30 most popular stocks among hedge funds (see the video at the end of this article). ABEV was in 16 hedge funds' portfolios at the end of the second quarter of 2019. There were 13 hedge funds in our database with ABEV holdings at the end of the previous quarter.

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.

Ken-Heebner

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 view the latest hedge fund action encompassing Ambev SA (NYSE:ABEV).

What have hedge funds been doing with Ambev SA (NYSE:ABEV)?

At the end of the second quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in ABEV a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ABEV Positions

When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the biggest position in Ambev SA (NYSE:ABEV). Fisher Asset Management has a $118.2 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $93.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism include Ken Griffin's Citadel Investment Group, John Overdeck and David Siegel's Two Sigma Advisors and Ken Heebner's Capital Growth Management.

As industrywide interest jumped, key hedge funds have jumped into Ambev SA (NYSE:ABEV) headfirst. Capital Growth Management, managed by Ken Heebner, initiated the most valuable position in Ambev SA (NYSE:ABEV). Capital Growth Management had $10.3 million invested in the company at the end of the quarter. Noam Gottesman's GLG Partners also initiated a $0.8 million position during the quarter. The following funds were also among the new ABEV investors: Peter Muller's PDT Partners, Paul Tudor Jones's Tudor Investment Corp, and Matthew Hulsizer's PEAK6 Capital Management.

Let's also examine hedge fund activity in other stocks similar to Ambev SA (NYSE:ABEV). These stocks are Morgan Stanley (NYSE:MS), Enbridge Inc (NYSE:ENB), BlackRock, Inc. (NYSE:BLK), and China Life Insurance Company Ltd. (NYSE:LFC). This group of stocks' market values are similar to ABEV's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MS,60,4267216,6 ENB,20,331452,0 BLK,43,675870,-2 LFC,8,45478,1 Average,32.75,1330004,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $1330 million. That figure was $295 million in ABEV's case. Morgan Stanley (NYSE:MS) is the most popular stock in this table. On the other hand China Life Insurance Company Ltd. (NYSE:LFC) is the least popular one with only 8 bullish hedge fund positions. Ambev SA (NYSE:ABEV) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ABEV wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ABEV investors were disappointed as the stock returned -1.1% 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. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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