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Did Hedge Funds Make The Right Call On Anheuser-Busch InBev SA/NV (BUD) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Anheuser-Busch InBev SA/NV (NYSE:BUD) and determine whether hedge funds skillfully traded this stock.

Anheuser-Busch InBev SA/NV (NYSE:BUD) has experienced a decrease in hedge fund interest recently. Our calculations also showed that BUD isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Halbower Pentwater Capital

Matthew Halbower of Pentwater Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a glance at the key hedge fund action surrounding Anheuser-Busch InBev SA/NV (NYSE:BUD).

How are hedge funds trading Anheuser-Busch InBev SA/NV (NYSE:BUD)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in BUD 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.

When looking at the institutional investors followed by Insider Monkey, Gardner Russo & Gardner, managed by Tom Russo, holds the most valuable position in Anheuser-Busch InBev SA/NV (NYSE:BUD). Gardner Russo & Gardner has a $350.3 million position in the stock, comprising 3.5% of its 13F portfolio. On Gardner Russo & Gardner’s heels is Ken Fisher of Fisher Asset Management, with a $311 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include Renaissance Technologies, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Gardner Russo & Gardner allocated the biggest weight to Anheuser-Busch InBev SA/NV (NYSE:BUD), around 3.54% of its 13F portfolio. Beddow Capital Management is also relatively very bullish on the stock, earmarking 3.03 percent of its 13F equity portfolio to BUD.

Judging by the fact that Anheuser-Busch InBev SA/NV (NYSE:BUD) has witnessed a decline in interest from the smart money, logic holds that there exists a select few funds that elected to cut their full holdings heading into Q4. At the top of the heap, Shane Finemore’s Manikay Partners dropped the biggest position of all the hedgies followed by Insider Monkey, totaling an estimated $44.3 million in stock, and Robert Pitts’s Steadfast Capital Management was right behind this move, as the fund dumped about $6.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 6 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Anheuser-Busch InBev SA/NV (NYSE:BUD) but similarly valued. These stocks are The Boeing Company (NYSE:BA), BP plc (NYSE:BP), Raytheon Technologies Corporation (NYSE:UTX), and United Parcel Service, Inc. (NYSE:UPS). This group of stocks’ market valuations resemble BUD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BA 54 877378 -28
BP 31 877653 -9
UTX 62 4025728 -19
UPS 48 842540 6
Average 48.75 1655825 -12.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.75 hedge funds with bullish positions and the average amount invested in these stocks was $1656 million. That figure was $877 million in BUD’s case. Raytheon Technologies Corporation (NYSE:UTX) is the most popular stock in this table. On the other hand BP plc (NYSE:BP) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks Anheuser-Busch InBev SA/NV (NYSE:BUD) is even less popular than BP. Hedge funds dodged a bullet by taking a bearish stance towards BUD. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but managed to beat the market by 17.1 percentage points. Unfortunately BUD wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); BUD investors were disappointed as the stock returned 23.8% since Q1 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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