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The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Monster Beverage Corp (NASDAQ:MNST).
Is MNST a good stock to buy now? Money managers were getting more bullish. The number of bullish hedge fund bets increased by 15 in recent months. Monster Beverage Corp (NASDAQ:MNST) was in 50 hedge funds' portfolios at the end of September. The all time high for this statistics is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MNST isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ray Dalio of Bridgewater Associates
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with 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. Now we're going to take a look at the key hedge fund action surrounding Monster Beverage Corp (NASDAQ:MNST).
What does smart money think about Monster Beverage Corp (NASDAQ:MNST)?
Heading into the fourth quarter of 2020, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 43% from the previous quarter. By comparison, 36 hedge funds held shares or bullish call options in MNST a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Monster Beverage Corp (NASDAQ:MNST), with a stake worth $1001.2 million reported as of the end of September. Trailing Renaissance Technologies was Broadwood Capital, which amassed a stake valued at $373.5 million. AQR Capital Management, D E Shaw, and Marshall Wace LLP 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 Broadwood Capital allocated the biggest weight to Monster Beverage Corp (NASDAQ:MNST), around 29.37% of its 13F portfolio. Incline Global Management is also relatively very bullish on the stock, earmarking 3.74 percent of its 13F equity portfolio to MNST.
Consequently, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, assembled the largest position in Monster Beverage Corp (NASDAQ:MNST). Point72 Asset Management had $97 million invested in the company at the end of the quarter. Alexander Mitchell's Scopus Asset Management also made a $69.2 million investment in the stock during the quarter. The other funds with brand new MNST positions are Ray Dalio's Bridgewater Associates, Jeff Lignelli's Incline Global Management, and Ryan Caldwell's Chiron Investment Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Monster Beverage Corp (NASDAQ:MNST) but similarly valued. We will take a look at HCA Healthcare Inc (NYSE:HCA), Roper Technologies Inc. (NYSE:ROP), Canadian Pacific Railway Limited (NYSE:CP), Honda Motor Co Ltd (NYSE:HMC), Digital Realty Trust, Inc. (NYSE:DLR), Eaton Corporation plc (NYSE:ETN), and DuPont de Nemours Inc (NYSE:DD). This group of stocks' market values are similar to MNST's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HCA,71,2443368,0 ROP,50,1372065,5 CP,32,1467228,-4 HMC,11,314104,1 DLR,25,252076,-1 ETN,35,586037,1 DD,61,3679088,-3 Average,40.7,1444852,-0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.7 hedge funds with bullish positions and the average amount invested in these stocks was $1445 million. That figure was $2370 million in MNST's case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand Honda Motor Co Ltd (NYSE:HMC) is the least popular one with only 11 bullish hedge fund positions. Monster Beverage Corp (NASDAQ:MNST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MNST is 72.5. 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately MNST wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MNST were disappointed as the stock returned 7.6% since the end of September (through 12/2) 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 this year.
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Disclosure: None. This article was originally published at Insider Monkey.