Do Hedge Funds Love NewAge, Inc. (NBEV)?

In this article we will analyze whether NewAge, Inc. (NASDAQ:NBEV) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

NewAge, Inc. (NASDAQ:NBEV) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. NBEV investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 5 hedge funds in our database with NBEV holdings at the end of June. Our calculations also showed that NBEV isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Peter Algert of Algert Global

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Now let’s analyze the recent hedge fund action encompassing NewAge, Inc. (NASDAQ:NBEV).

What have hedge funds been doing with NewAge, Inc. (NASDAQ:NBEV)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in NBEV over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in NewAge, Inc. (NASDAQ:NBEV). Citadel Investment Group has a $0.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is OZ Management, managed by Daniel S. Och, which holds a $0.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other professional money managers that hold long positions encompass Ken Griffin’s Citadel Investment Group, Renaissance Technologies and Peter Algert’s Algert Global. In terms of the portfolio weights assigned to each position Algert Global allocated the biggest weight to NewAge, Inc. (NASDAQ:NBEV), around 0.01% of its 13F portfolio. OZ Management is also relatively very bullish on the stock, designating 0.002 percent of its 13F equity portfolio to NBEV.

Judging by the fact that NewAge, Inc. (NASDAQ:NBEV) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers that decided to sell off their positions entirely last quarter. At the top of the heap, Renaissance Technologies sold off the biggest position of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $0.7 million in stock. Ken Griffin’s fund, Citadel Investment Group, also said goodbye to its stock, about $0.5 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as NewAge, Inc. (NASDAQ:NBEV) but similarly valued. These stocks are Ampio Pharmaceuticals, Inc. (NYSE:AMPE), Kindred Biosciences Inc (NASDAQ:KIN), GasLog Partners LP (NYSE:GLOP), Earthstone Energy, Inc. (NYSE:ESTE), Team, Inc. (NYSE:TISI), Axcella Health Inc. (NASDAQ:AXLA), and Howard Bancorp Inc (NASDAQ:HBMD). This group of stocks’ market caps resemble NBEV’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMPE 2 67 1
KIN 11 50510 -1
GLOP 5 638 -2
ESTE 3 3571 -3
TISI 15 45652 3
AXLA 3 672 -2
HBMD 4 11065 -1
Average 6.1 16025 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.1 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $1 million in NBEV’s case. Team, Inc. (NYSE:TISI) is the most popular stock in this table. On the other hand Ampio Pharmaceuticals, Inc. (NYSE:AMPE) is the least popular one with only 2 bullish hedge fund positions. NewAge, Inc. (NASDAQ:NBEV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for NBEV is 26.7. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on NBEV as the stock returned 94.2% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

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