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Hedge Funds Are Warming Up To Craft Brew Alliance Inc (BREW)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Craft Brew Alliance Inc (NASDAQ:BREW) based on that data and determine whether they were really smart about the stock.

Craft Brew Alliance Inc (NASDAQ:BREW) investors should pay attention to an increase in support from the world’s most elite money managers lately. Our calculations also showed that BREW 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.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the latest hedge fund action regarding Craft Brew Alliance Inc (NASDAQ:BREW).

What does smart money think about Craft Brew Alliance Inc (NASDAQ:BREW)?

At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 57% from the fourth quarter of 2019. By comparison, 11 hedge funds held shares or bullish call options in BREW a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is BREW A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, GAMCO Investors, managed by Mario Gabelli, holds the biggest position in Craft Brew Alliance Inc (NASDAQ:BREW). GAMCO Investors has a $7.7 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Omni Partners, led by Steven Clark, holding a $2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions encompass Israel Englander’s Millennium Management, Mark Broach’s Manatuck Hill Partners and Jamie Zimmerman’s Litespeed Management. In terms of the portfolio weights assigned to each position Litespeed Management allocated the biggest weight to Craft Brew Alliance Inc (NASDAQ:BREW), around 2.18% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, earmarking 0.98 percent of its 13F equity portfolio to BREW.

As one would reasonably expect, some big names have been driving this bullishness. Omni Partners, managed by Steven Clark, initiated the most valuable position in Craft Brew Alliance Inc (NASDAQ:BREW). Omni Partners had $2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $1.1 million position during the quarter. The other funds with brand new BREW positions are Jamie Zimmerman’s Litespeed Management, Frederick DiSanto’s Ancora Advisors, and Michael M. Rothenberg’s Moab Capital Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Craft Brew Alliance Inc (NASDAQ:BREW) but similarly valued. We will take a look at Alerus Financial Corporation (NASDAQ:ALRS), Celsius Holdings, Inc. (NASDAQ:CELH), Avid Technology, Inc. (NASDAQ:AVID), and Ducommun Incorporated (NYSE:DCO). This group of stocks’ market values are similar to BREW’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALRS 1 231 -1
CELH 8 7988 1
AVID 15 71812 2
DCO 11 38961 0
Average 8.75 29748 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $15 million in BREW’s case. Avid Technology, Inc. (NASDAQ:AVID) is the most popular stock in this table. On the other hand Alerus Financial Corporation (NASDAQ:ALRS) is the least popular one with only 1 bullish hedge fund positions. Craft Brew Alliance Inc (NASDAQ:BREW) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately BREW wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BREW were disappointed as the stock returned 3.3% during the same time period 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 many of these stocks already outperformed the market so far this year.

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