We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Starbucks Corporation (NASDAQ:SBUX) based on that data.
Is Starbucks Corporation (NASDAQ:SBUX) the right investment to pursue these days? The best stock pickers are in an optimistic mood. The number of bullish hedge fund positions went up by 2 in recent months. Our calculations also showed that SBUX 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). SBUX was in 68 hedge funds’ portfolios at the end of the first quarter of 2020. There were 66 hedge funds in our database with SBUX positions at the end of the previous quarter.
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 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 44 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the key hedge fund action surrounding Starbucks Corporation (NASDAQ:SBUX).
What does smart money think about Starbucks Corporation (NASDAQ:SBUX)?
Heading into the second quarter of 2020, a total of 68 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from one quarter earlier. By comparison, 47 hedge funds held shares or bullish call options in SBUX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Pershing Square held the most valuable stake in Starbucks Corporation (NASDAQ:SBUX), which was worth $666 million at the end of the third quarter. On the second spot was Cedar Rock Capital which amassed $554.3 million worth of shares. D E Shaw, Fisher Asset Management, and Two Sigma Advisors 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 Cedar Rock Capital allocated the biggest weight to Starbucks Corporation (NASDAQ:SBUX), around 14.83% of its 13F portfolio. Pacifica Capital Investments is also relatively very bullish on the stock, setting aside 14.78 percent of its 13F equity portfolio to SBUX.
As aggregate interest increased, some big names were breaking ground themselves. BlueSpruce Investments, managed by Tim Hurd and Ed Magnus, established the largest position in Starbucks Corporation (NASDAQ:SBUX). BlueSpruce Investments had $157.1 million invested in the company at the end of the quarter. Eashwar Krishnan’s Tybourne Capital Management also initiated a $86.3 million position during the quarter. The following funds were also among the new SBUX investors: Aaron Cowen’s Suvretta Capital Management, Michael Blitzer’s Kingstown Capital Management, and Daniel Sundheim’s D1 Capital Partners.
Let’s also examine hedge fund activity in other stocks similar to Starbucks Corporation (NASDAQ:SBUX). We will take a look at Toronto-Dominion Bank (NYSE:TD), BHP Billiton plc (NYSE:BBL), Fidelity National Information Services Inc. (NYSE:FIS), and Diageo plc (NYSE:DEO). All of these stocks’ market caps are closest to SBUX’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.5 hedge funds with bullish positions and the average amount invested in these stocks was $2489 million. That figure was $3229 million in SBUX’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 17 bullish hedge fund positions. Starbucks Corporation (NASDAQ:SBUX) is not the most popular stock in this group but hedge fund interest is still above average. 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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on SBUX, though not to the same extent, as the stock returned 18.7% during the first two months of the second quarter (through May 22nd) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.