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Hedge Funds Dropped The Ball On Anheuser-Busch InBev SA/NV (BUD)

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Anheuser-Busch InBev SA/NV (NYSE:BUD).

Is Anheuser-Busch InBev SA/NV (NYSE:BUD) worth your attention right now? Hedge funds are reducing their bets on the stock. The number of bullish hedge fund positions were cut by 4 recently. Overall hedge fund sentiment towards the stock is at its all time low. Our calculations also showed that BUD isn’t among the 30 most popular stocks among hedge funds. BUD was in 18 hedge funds’ portfolios at the end of June. There were 22 hedge funds in our database with BUD positions at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the new 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 second quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in BUD a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with BUD Positions

The largest stake in Anheuser-Busch InBev SA/NV (NYSE:BUD) was held by Gardner Russo & Gardner, which reported holding $701.4 million worth of stock at the end of March. It was followed by Fisher Asset Management with a $607.4 million position. Other investors bullish on the company included Alkeon Capital Management, Balyasny Asset Management, and Renaissance Technologies.

Because Anheuser-Busch InBev SA/NV (NYSE:BUD) has faced bearish sentiment from hedge fund managers, it’s safe to say that there exists a select few hedge funds that elected to cut their entire stakes by the end of the second quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the biggest position of the “upper crust” of funds followed by Insider Monkey, worth an estimated $36.9 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also sold off its stock, about $3.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 4 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks similar to Anheuser-Busch InBev SA/NV (NYSE:BUD). We will take a look at HSBC Holdings plc (NYSE:HSBC), SAP SE (NYSE:SAP), The Unilever Group (NYSE:UL), and Netflix, Inc. (NASDAQ:NFLX). This group of stocks’ market valuations match BUD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HSBC 16 1133528 4
SAP 17 1479359 9
UL 10 424712 -3
NFLX 106 11090012 10
Average 37.25 3531903 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $3532 million. That figure was $1764 million in BUD’s case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand The Unilever Group (NYSE:UL) is the least popular one with only 10 bullish hedge fund positions. Anheuser-Busch InBev SA/NV (NYSE:BUD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on BUD as the stock returned 7.5% during the same time frame and outperformed the market by an even larger margin.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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