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Hedge Funds Have Never Been This Bullish On Beyond Meat, Inc. (BYND)

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Beyond Meat, Inc. (NASDAQ:BYND), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Beyond Meat, Inc. (NASDAQ:BYND) investors should pay attention to an increase in hedge fund interest in recent months. BYND was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 17 hedge funds in our database with BYND holdings at the end of the previous quarter. Our calculations also showed that BYND isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 41 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.

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the latest hedge fund action surrounding Beyond Meat, Inc. (NASDAQ:BYND).

What have hedge funds been doing with Beyond Meat, Inc. (NASDAQ:BYND)?

Heading into the first quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the third quarter of 2019. On the other hand, there were a total of 0 hedge funds with a bullish position in BYND a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Beyond Meat, Inc. (NASDAQ:BYND), which was worth $51 million at the end of the third quarter. On the second spot was Alkeon Capital Management which amassed $37.8 million worth of shares. Coatue Management, D E Shaw, and Citadel Investment Group 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 Tairen Capital allocated the biggest weight to Beyond Meat, Inc. (NASDAQ:BYND), around 1.6% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, setting aside 0.42 percent of its 13F equity portfolio to BYND.

Now, key money managers were breaking ground themselves. Coatue Management, managed by Philippe Laffont, initiated the most valuable position in Beyond Meat, Inc. (NASDAQ:BYND). Coatue Management had $26 million invested in the company at the end of the quarter. Larry Chen and Terry Zhang’s Tairen Capital also made a $10.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Schonfeld Strategic Advisors.

Let’s also examine hedge fund activity in other stocks similar to Beyond Meat, Inc. (NASDAQ:BYND). These stocks are Ritchie Bros. Auctioneers (NYSE:RBA), Allakos Inc. (NASDAQ:ALLK), Eldorado Resorts Inc (NASDAQ:ERI), and Companhia Paranaense de Energia (NYSE:ELP). This group of stocks’ market values are similar to BYND’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RBA 21 259769 7
ALLK 15 414366 -2
ERI 49 1337579 0
ELP 7 77363 -1
Average 23 522269 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $522 million. That figure was $69 million in BYND’s case. Eldorado Resorts Inc (NASDAQ:ERI) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia (NYSE:ELP) is the least popular one with only 7 bullish hedge fund positions. Beyond Meat, Inc. (NASDAQ:BYND) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on BYND as the stock returned -3.4% during the same time period 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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