Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Boston Beer Company Inc (NYSE:SAM) a good stock to buy now? Money managers are buying. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings moved up by 3 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as WESCO International, Inc. (NYSE:WCC), Armstrong World Industries, Inc. (NYSE:AWI), and Zynga Inc (NASDAQ:ZNGA) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
What have hedge funds been doing with Boston Beer Company Inc (NYSE:SAM)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 23% rise from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SAM over the last 5 quarters, which has consistently trended downwards, save for the latest quarter’s small rebound. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Tybourne Capital Management, led by Eashwar Krishnan, holds the number one position in Boston Beer Company Inc (NYSE:SAM). Tybourne Capital Management has a $141.5 million position in the stock, comprising 7.1% of its 13F portfolio. On Tybourne Capital Management’s heels is Ken Fisher of Fisher Asset Management, with a $54.1 million position. Other hedge funds and institutional investors that hold long positions include Shane Finemore’s Manikay Partners, Cliff Asness’ AQR Capital Management, and Israel Englander’s Millennium Management. We should note that top shareholder Tybourne Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, some big names were breaking ground themselves. Millennium Management established the largest position in Boston Beer Company Inc (NYSE:SAM). Millennium Management had $6.8 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $4.8 million position during the quarter. The following funds were also among the new SAM investors: Neil Chriss’ Hutchin Hill Capital, Ken Griffin’s Citadel Investment Group, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Boston Beer Company Inc (NYSE:SAM) but similarly valued. We will take a look at WESCO International, Inc. (NYSE:WCC), Armstrong World Industries, Inc. (NYSE:AWI), Zynga Inc (NASDAQ:ZNGA), and Retail Opportunity Investments Corp (NASDAQ:ROIC). This group of stocks’ market valuations resemble SAM’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $472 million. That figure was $278 million in SAM’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Retail Opportunity Investments Corp (NASDAQ:ROIC) is the least popular one with only 8 bullish hedge fund positions. Boston Beer Company Inc (NYSE:SAM) 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. In this regard ZNGA might be a better candidate to consider taking a long position in.