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Is KDP Stock A Buy or Sell?

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Abigail Fisher
·6 min read
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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Keurig Dr Pepper Inc. (NASDAQ:KDP) based on that data.

Is KDP stock a buy? Keurig Dr Pepper Inc. (NASDAQ:KDP) shareholders have witnessed a decrease in support from the world's most elite money managers lately. Keurig Dr Pepper Inc. (NASDAQ:KDP) was in 29 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 41. There were 41 hedge funds in our database with KDP positions at the end of the third quarter. Our calculations also showed that KDP isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Dmitry Balyasny of Balyasny Asset Managemnet
Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Keeping this in mind let's go over the key hedge fund action regarding Keurig Dr Pepper Inc. (NASDAQ:KDP).

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

Heading into the first quarter of 2021, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in KDP a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Cedar Rock Capital, managed by Andy Brown, holds the biggest position in Keurig Dr Pepper Inc. (NASDAQ:KDP). Cedar Rock Capital has a $286.3 million position in the stock, comprising 6.2% of its 13F portfolio. Sitting at the No. 2 spot of Renaissance Technologies, with a $152.4 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other peers with similar optimism include Brett Barakett's Tremblant Capital, Ken Griffin's Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. 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 6.19% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, dishing out 3.84 percent of its 13F equity portfolio to KDP.

Judging by the fact that Keurig Dr Pepper Inc. (NASDAQ:KDP) has witnessed declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of funds that decided to sell off their positions entirely in the fourth quarter. At the top of the heap, Jack Woodruff's Candlestick Capital Management said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, totaling an estimated $57.3 million in stock, and Ricky Sandler's Eminence Capital was right behind this move, as the fund dropped about $42.8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 12 funds in the fourth quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Keurig Dr Pepper Inc. (NASDAQ:KDP) but similarly valued. These stocks are The Blackstone Group Inc. (NYSE:BX), NXP Semiconductors NV (NASDAQ:NXPI), Peloton Interactive, Inc. (NASDAQ:PTON), Vodafone Group Plc (NASDAQ:VOD), Palantir Technologies Inc. (NYSE:PLTR), Cognizant Technology Solutions Corp (NASDAQ:CTSH), and Ross Stores, Inc. (NASDAQ:ROST). This group of stocks' market valuations match KDP's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BX,54,1450344,5 NXPI,66,2259680,-2 PTON,63,5666462,5 VOD,17,745457,-5 PLTR,38,1902514,7 CTSH,46,3517450,1 ROST,57,1308907,11 Average,48.7,2407259,3.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.7 hedge funds with bullish positions and the average amount invested in these stocks was $2407 million. That figure was $1077 million in KDP's case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 17 bullish hedge fund positions. Keurig Dr Pepper Inc. (NASDAQ:KDP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KDP is 26.5. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.2% in 2021 through April 12th and beat the market by 1.5 percentage points. A small number of hedge funds were also right about betting on KDP, though not to the same extent, as the stock returned 11.9% since the end of Q4 (through April 12th) and outperformed the market.

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

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