While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors kept their optimism regarding the current bull run in the fourth quarter, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding The Boston Beer Company Inc (NYSE:SAM).
The Boston Beer Company Inc (NYSE:SAM) was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2018. SAM has seen an increase in hedge fund interest of late. There were 14 hedge funds in our database with SAM holdings at the end of the previous quarter. Our calculations also showed that SAM isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.
Let’s take a look at the latest hedge fund action encompassing The Boston Beer Company Inc (NYSE:SAM).
What does the smart money think about The Boston Beer Company Inc (NYSE:SAM)?
Heading into the first quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SAM over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in The Boston Beer Company Inc (NYSE:SAM), which was worth $75.4 million at the end of the fourth quarter. On the second spot was Fisher Asset Management which amassed $75.2 million worth of shares. Moreover, Renaissance Technologies, Two Sigma Advisors, and Winton Capital Management were also bullish on The Boston Beer Company Inc (NYSE:SAM), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, some big names were breaking ground themselves. Maplelane Capital, managed by Leon Shaulov, initiated the largest position in The Boston Beer Company Inc (NYSE:SAM). Maplelane Capital had $2.9 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also made a $1.5 million investment in the stock during the quarter. The other funds with brand new SAM positions are Minhua Zhang’s Weld Capital Management, Mike Vranos’s Ellington, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s also examine hedge fund activity in other stocks similar to The Boston Beer Company Inc (NYSE:SAM). These stocks are Avista Corp (NYSE:AVA), Uniti Group Inc. (NASDAQ:UNIT), Senior Housing Properties Trust (NASDAQ:SNH), and Adtalem Global Education Inc. (NYSE:ATGE). This group of stocks’ market valuations are closest to SAM’s market valuation.
|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 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $267 million in SAM’s case. Senior Housing Properties Trust (NASDAQ:SNH) is the most popular stock in this table. On the other hand Uniti Group Inc. (NASDAQ:UNIT) is the least popular one with only 14 bullish hedge fund positions. The Boston Beer Company Inc (NYSE:SAM) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SAM wasn’t nearly as popular as these 15 stock and hedge funds that were betting on SAM were disappointed as the stock returned 12.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.