David Andre and Astro Teller’s Cerebellum Capital is a fascinating hedge fund to track given the massive portfolio turnover it undertakes every quarter. The fund, which was founded in April 2017 and is currently being run by CEO Conrad Gann, uses advanced machine learning that can autonomously discover and implement its own strategies, helping the fund uncover stocks that are likely to excel in the near future.
The fund aims to deliver 8% net returns annually but has failed to achieve that mark in each of its first three years. Its maiden year saw returns of 6.70%, which dropped to just a smidge above flat returns in 2018 at 0.08%. 2.89% returns in 2019 gave way to immense difficulty alongside much of the market during the first quarter of 2020, as the pandemic blindsided Cerebellum’s machine learning strategies, leaving the fund with 16.33% Q1 losses.
At the end of Q3 2020, 221 of Cerebellum’s 378 13F positions were added during the quarter, while 314 of the 471 holdings it owned at the end of Q2 were sold off during Q3. Despite the high quarterly turnover, Cerebellum Capital’s sector allocation tends to stay within similar ranges, with consumer discretionary, finance and tech stocks generally being among its favorites.
Let’s check out five of the more intriguing additions to Cerebellum’s portfolio in Q3, which may represent interesting short-term additions to your own portfolio.
Stocks Added to Cerebellum Capital’s Portfolio in Q3
Hedge fund ownership of Yelp Inc (NYSE:YELP) declined by 33% between mid-2016 and the end of 2017, and has remained at depressed levels since then. That didn’t stop Cerebellum Capital from taking the plunge in Q3 with Yelp shares still down by around 40% year-to-date. Yelp will need a stronger economic recovery (and possibly a Covid-19 vaccine) to help drive more traffic to small businesses and spark a renewed interest in its platform.
Hedge funds were big fans of Zillow Group Inc (NASDAQ:Z) during Q2, as ownership of the stock jumped by 59% among the funds tracked by Insider Monkey. Cerebellum Capital jumped aboard the Zillow train in Q3, joining the growing group of happy investors who own one of 2020’s best performing stocks. Zillow shares have gained over 115% this year on the strength of a surprisingly strong housing market and soaring demand for its online real estate listings platform.
Coca-Cola European Partners
Hedge fund interest in Coca-Cola European Partners plc (NYSE:CCEP) has picked up over the last year after crashing by 75% between the middle of 2016 and the middle of 2019. The standalone company that is responsible for the bottling, distribution and marketing of The Coca-Cola Company (NYSE:KO)’s products has just taken a big step to expand its presence in the southern hemisphere, buying Australian bottler Coca-Cola Amatil for A$9.23 billion ($6.6 billion).
Hedge funds were getting revved up about Harley-Davidson, Inc. (NYSE:HOG) in Q2, with a 76% surge in ownership of the motorcycle manufacturer among the funds tracked by Insider Monkey. That trend may be continuing in Q3, with Cerebellum Capital also buying HOG shares. Robert Bishop’s Impala Asset Management, which has an activist stake in Harley-Davidson and helped oust the company’s former leader Matt Levatich, has been impressed with the work of new CEO Jochen Zeist, with Bishop saying that the company is on the right track for the first time in several years.
Monster Beverage Corp (NASDAQ:MNST) has been a popular stock among the hedge funds tracked by Insider Monkey over the past year, reaching record ownership at the end of 2019. Things changed in Q2 however, as 19% of hedge fund shareholders sold off MNST, including Steve Cohen’s Point72 Asset Management. The energy drink company’s gross sales plummeted by 22% in April, which may have spooked some hedge fund managers. Despite that, Monster Beverage did hold up reasonably well in Q2, with sales of $1.09 billion and earnings of $0.59 both topping estimates.
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Video: Top 5 Stocks Among Hedge Funds
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Disclosure: None. This article is originally published at Insider Monkey.