In this article we will take a look at whether hedge funds think Monster Beverage Corp (NASDAQ:MNST) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Monster Beverage Corp (NASDAQ:MNST) was in 35 hedge funds' portfolios at the end of June. The all time high for this statistics is 45. MNST shareholders have witnessed a decrease in hedge fund interest in recent months. There were 43 hedge funds in our database with MNST positions at the end of the first quarter. Our calculations also showed that MNST isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 biggest insurance companies to identify fast growing companies in various industries. 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 to get excerpts of these letters in your inbox. Now we're going to take a glance at the key hedge fund action encompassing Monster Beverage Corp (NASDAQ:MNST).
How have hedgies been trading Monster Beverage Corp (NASDAQ:MNST)?
At Q2's end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the previous quarter. By comparison, 38 hedge funds held shares or bullish call options in MNST 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.
More specifically, Renaissance Technologies was the largest shareholder of Monster Beverage Corp (NASDAQ:MNST), with a stake worth $894.8 million reported as of the end of June. Trailing Renaissance Technologies was Broadwood Capital, which amassed a stake valued at $322.8 million. AQR Capital Management, Marshall Wace LLP, and D E Shaw 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 25.23% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.77 percent of its 13F equity portfolio to MNST.
Due to the fact that Monster Beverage Corp (NASDAQ:MNST) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedge funds that elected to cut their full holdings by the end of the second quarter. At the top of the heap, Aaron Cowen's Suvretta Capital Management sold off the biggest position of all the hedgies watched by Insider Monkey, totaling an estimated $62.8 million in stock. Steve Cohen's fund, Point72 Asset Management, also said goodbye to its stock, about $35.5 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 8 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to Monster Beverage Corp (NASDAQ:MNST). These stocks are General Motors Company (NYSE:GM), Exelon Corporation (NYSE:EXC), Veeva Systems Inc (NYSE:VEEV), Eaton Corporation plc (NYSE:ETN), Las Vegas Sands Corp. (NYSE:LVS), Canadian Pacific Railway Limited (NYSE:CP), and Eni SpA (NYSE:E). All of these stocks' market caps resemble MNST's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GM,69,4380069,16 EXC,30,772535,-3 VEEV,35,529727,2 ETN,34,560308,-1 LVS,47,2396746,5 CP,36,1635509,4 E,8,43125,3 Average,37,1474003,3.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1474 million. That figure was $1881 million in MNST's case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 8 bullish hedge fund positions. Monster Beverage Corp (NASDAQ:MNST) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MNST is 42.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. A small number of hedge funds were also right about betting on MNST as the stock returned 10.5% since the end of the second quarter (through 10/30) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.