Did Hedge Funds Drop The Ball On Monster Beverage Corp (MNST) ?

World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Is Monster Beverage Corp (NASDAQ:MNST) a cheap investment now? Prominent investors are becoming more confident. The number of long hedge fund positions increased by 1 in recent months. Our calculations also showed that mnst isn’t among the 30 most popular stocks among hedge funds. MNST was in 33 hedge funds’ portfolios at the end of the first quarter of 2019. There were 32 hedge funds in our database with MNST positions at the end of the previous quarter.

To most market participants, hedge funds are assumed to be worthless, old investment vehicles of yesteryear. While there are over 8000 funds trading at present, Our experts hone in on the masters of this club, approximately 750 funds. These money managers shepherd the lion’s share of the smart money’s total capital, and by paying attention to their best equity investments, Insider Monkey has spotted various investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.

Eashwar Krishnan - Tybourne Capital

We’re going to go over the new hedge fund action encompassing Monster Beverage Corp (NASDAQ:MNST).

What does the smart money think about Monster Beverage Corp (NASDAQ:MNST)?

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MNST over the last 15 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

No of Hedge Funds with MNST Positions

Among these funds, Renaissance Technologies held the most valuable stake in Monster Beverage Corp (NASDAQ:MNST), which was worth $393.5 million at the end of the first quarter. On the second spot was Broadwood Capital which amassed $255.4 million worth of shares. Moreover, Tybourne Capital Management, GLG Partners, and AQR Capital Management were also bullish on Monster Beverage Corp (NASDAQ:MNST), allocating a large percentage of their portfolios to this stock.

Now, key hedge funds were breaking ground themselves. Element Capital Management, managed by Jeffrey Talpins, assembled the most outsized position in Monster Beverage Corp (NASDAQ:MNST). Element Capital Management had $17.6 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $9.1 million position during the quarter. The following funds were also among the new MNST investors: David Costen Haley’s HBK Investments, Frank Slattery’s Symmetry Peak Management, and Roger Ibbotson’s Zebra Capital Management.

Let’s go over hedge fund activity in other stocks similar to Monster Beverage Corp (NASDAQ:MNST). These stocks are Tencent Music Entertainment Group (NYSE:TME), BT Group plc (NYSE:BT), Xcel Energy Inc (NASDAQ:XEL), and Canadian Pacific Railway Limited (NYSE:CP). This group of stocks’ market caps are closest to MNST’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TME 20 424298 -5
BT 14 39409 5
XEL 16 527326 -5
CP 30 1974726 -10
Average 20 741440 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $741 million. That figure was $2067 million in MNST’s case. Canadian Pacific Railway Limited (NYSE:CP) is the most popular stock in this table. On the other hand BT Group plc (NYSE:BT) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Monster Beverage Corp (NASDAQ:MNST) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on MNST as the stock returned 14.1% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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