Five Beverage Stocks Hedge Funds Like

The merger between Anheuser Busch Inbev SA (ADR) (NYSE:BUD) and SAB Miller has been the main event in the beverage sector, with the deal expected to be completed in the second half of the year. Since the deal has posed some regulatory difficulties, the two major producers were forced to dispose of some of the assets, which were promptly picked up by their competitors. Let’s take a look at some of these moves and the way hedge funds have positioned themselves in the sector.

An everyday investor doesn’t have the same resources and capabilities to analyze different publicly-traded companies as hedge funds do. This is why it is a good idea to see what stocks hedge funds like the most and try to imitate some of their bullish moves in an attempt to reap market-beating returns. At Insider Monkey, we follow the activity of several hundred of the best-performing hedge funds as part of our strategy. We analyze their 13F filings and use the data to see what stocks they are collectively bullish on. Through extensive research, we have determined that the best approach to outperform the broader indices is to follow hedge funds into their top small-cap ideas (see more details here).

During the fourth quarter of 2015, hedge fund sentiment towards Constellation Brands, Inc. (NYSE:STZ) has slightly improved, as the number of funds tracked by Insider Monkey with long positions increased to 67 from 64 at the end of the third quarter. Together, these funds control approximately 19% of the company’s common stock as of the end of December. Stephen Mandel of Lone Pine Capital is among those that sought to buy the stock during the quarter, having increased his stake by 15%. In its latest 13F filing, Lone Pine indicated ownership of 5.35 million shares worth $762 million. Although Constellation Brands, Inc. (NYSE:STZ)’s main assets are considered its beer brands, the company’s wine business has made a surprising comeback in the last quarter. Wine sales increased by $25 million and operating margins increased to 27.5% for the period. The beer business is also hot, with several breweries expecting a steep increase in output as Constellation Brands, Inc. (NYSE:STZ) is struggling to meet the consumer demand.

The popularity of Molson Coors Brewing Company (NYSE:TAP) plummeted during the fourth quarter, with many hedge fund managers seeking to offload their positions. At the end of December, 53 elite funds were invested in the stock, down from 70 at the end of September. While Ken Griffin‘s Citadel Investment Group was dumping the stock, having decreased its investment by 27% to 2.23 million shares, First Eagle Investment Management was buying left and right, boosting its stake in Molson Coors by 67% to 3.03 million shares worth $285 million at the end of December. In its latest quarterly report, Molson Coors Brewing Company (NYSE:TAP) posted revenues of $844.4 million and adjusted earnings of $0.49 per share, missing analysts’ estimates of $0.52 per share. The stock is currently trading around the $92 level, approximately where it was at the start of the year, having climbed back after a 13% decline. Molson Coors Brewing Company (NYSE:TAP) is set to take full control of its joint venture with SABMiller, MillerCoors. Molson Coors currently holds 41% of the venture and has agreed to acquire the remaining 51% for $12 billion upon the completion of the SABMiller-Anheuser merger.

Anheuser Busch Inbev SA (ADR) (NYSE:BUD) is another stock hedge funds were shying away from during the quarter. The number of long hedge fund positions (among the funds tracked by Insider Monkey) decreased to 36 by the end of December, or 4.5% of the funds tracked by Insider Monkey. In November 2015, Anheuser Busch reached an agreement to acquire one of its rivals, SABMiller, for $106 billion, a deal that would see the creation of a first mega brewer, responsible for roughly 30% of the world’s beer sales and with estimated annual revenues of $64 billion. There are some downsides, however, as Anheuser Busch was forced to divest certain brands from SAB Miller’s portfolio in Europe and China in order to meet regulatory approval. So far this year, the stock has been trending sideways and is currently down by approximately 5%. Contrary to the general opinion, Eric W. Mandelblatt‘s Soroban Capital Partners is still bullish on Anheuser Busch Inbev SA (ADR) (NYSE:BUD), having further increased its stake during the quarter to 10.9 million shares valued at $1.36 billion at the end of 2015.

Hedge fund sentiment towards Boston Beer Co Inc (NYSE:SAM) did not change much during the quarter. The number of hedge funds from the Insider Monkey database holding a stake in the company inched down to 22 from 24 at the end of the third quarter. Their combined investments amount to approximately 12% of the company’s outstanding stock. The research community is not too optimistic about the prospects of Boston Beer Co Inc (NYSE:SAM) either. Analysts at Credit Agricole have recently downgraded the stock to ‘Underperform’ from the previous rating of ‘Outperform’ and has placed a price target of $200 per share. Citigroup has recently initiated coverage on the stock with a ‘Sell’ rating and price target of $186 per share. Legendary investor Joel Greenblatt’s Gotham Asset Management is bullish on Boston Beer Co Inc (NYSE:SAM) and has more than doubled its position during the fourth quarter to 210,617 shares worth $42.5 million in its latest 13F filing.

Ambev SA (ADR) (NYSE:ABEV) fan club gained a couple more members during the quarter, as the number of hedge funds invested in the company increased to 21 from 18 a quarter before. Still, their holdings are insignificant, as together they hold less than 1% of the company’s common stock. So far this year, the stock has surged by more than 12%, having ended yesterday’s trading session at $4.82 per share. Analysts mainly recommend the stock as a ‘Buy’ and have an average price target of $4.90 per share. Billionaire Ken Fisher of Fisher Asset Management sees Ambev SA (ADR) (NYSE:ABEV) as a good investment, having increased his holding of the stock by 50% in the past quarter. Fisher Asset Management reportedly holds 18.9 million shares valued at  $84.1 million at the end of December.

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