Hedge Funds Are Souring On Monster Beverage Corporation (MNST)

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 37.4% through the end of November and outperformed the broader market benchmark by 9.9 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Monster Beverage Corporation (NASDAQ:MNST) has experienced a decrease in support from the world’s most elite money managers lately. Our calculations also showed that MNST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are perceived as unimportant, old financial vehicles of years past. While there are greater than 8000 funds in operation today, Our researchers choose to focus on the masters of this club, approximately 750 funds. Most estimates calculate that this group of people have their hands on the majority of the smart money’s total asset base, and by following their finest equity investments, Insider Monkey has revealed a number of investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .


Lee Ainslie of Maverick Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the key hedge fund action surrounding Monster Beverage Corporation (NASDAQ:MNST).

Hedge fund activity in Monster Beverage Corporation (NASDAQ:MNST)

Heading into the fourth quarter of 2019, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MNST over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

No of Hedge Funds with MNST Positions

Among these funds, Viking Global held the most valuable stake in Monster Beverage Corporation (NASDAQ:MNST), which was worth $611.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $552.6 million worth of shares. Broadwood Capital, AQR Capital Management, and Maverick Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Broadwood Capital allocated the biggest weight to Monster Beverage Corporation (NASDAQ:MNST), around 37.71% of its portfolio. Viking Global is also relatively very bullish on the stock, designating 3.19 percent of its 13F equity portfolio to MNST.

Judging by the fact that Monster Beverage Corporation (NASDAQ:MNST) has experienced bearish sentiment from hedge fund managers, logic holds that there were a few hedge funds that slashed their full holdings in the third quarter. It’s worth mentioning that Eashwar Krishnan’s Tybourne Capital Management dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $199.4 million in stock. James Crichton’s fund, Hitchwood Capital Management, also dumped its stock, about $22.3 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Monster Beverage Corporation (NASDAQ:MNST) but similarly valued. We will take a look at Tyson Foods, Inc. (NYSE:TSN), Public Service Enterprise Group Incorporated (NYSE:PEG), Consolidated Edison, Inc. (NYSE:ED), and TE Connectivity Ltd. (NYSE:TEL). This group of stocks’ market valuations are similar to MNST’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TSN 48 1716693 9
PEG 18 838718 -5
ED 22 1396380 -4
TEL 30 1265055 3
Average 29.5 1304212 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $1304 million. That figure was $2641 million in MNST’s case. Tyson Foods, Inc. (NYSE:TSN) is the most popular stock in this table. On the other hand Public Service Enterprise Group Incorporated (NYSE:PEG) is the least popular one with only 18 bullish hedge fund positions. Monster Beverage Corporation (NASDAQ:MNST) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MNST wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MNST were disappointed as the stock returned 3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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