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How Did The Boston Beer Company Inc (SAM) Compare Against Top Hedge Fund Stocks in 2019?

Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.3% in 2019 and outperformed the broader market benchmark by 10.1 percentage points. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is The Boston Beer Company Inc (NYSE:SAM) a bargain? Money managers are in an optimistic mood. The number of long hedge fund positions went up by 6 recently. Our calculations also showed that SAM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the eyes of most shareholders, hedge funds are perceived as worthless, outdated financial tools of years past. While there are over 8000 funds trading at the moment, We look at the aristocrats of this club, approximately 750 funds. These investment experts oversee most of the smart money’s total asset base, and by keeping track of their highest performing investments, Insider Monkey has found many investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

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 check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to review the latest hedge fund action encompassing The Boston Beer Company Inc (NYSE:SAM).

How are hedge funds trading The Boston Beer Company Inc (NYSE:SAM)?

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 26% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in SAM a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of The Boston Beer Company Inc (NYSE:SAM), with a stake worth $151.1 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $115.4 million. Citadel Investment Group, Fisher Asset Management, and Millennium Management 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 Moore Global Investments allocated the biggest weight to The Boston Beer Company Inc (NYSE:SAM), around 0.58% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.36 percent of its 13F equity portfolio to SAM.

Consequently, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, assembled the biggest call position in The Boston Beer Company Inc (NYSE:SAM). Millennium Management had $20 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also initiated a $14.6 million position during the quarter. The following funds were also among the new SAM investors: Andrew Sandler’s Sandler Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Matthew Tewksbury’s Stevens Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Boston Beer Company Inc (NYSE:SAM) but similarly valued. We will take a look at Helmerich & Payne, Inc. (NYSE:HP), Assured Guaranty Ltd. (NYSE:AGO), China Biologic Products Holdings, Inc. (NASDAQ:CBPO), and Pinnacle Financial Partners (NASDAQ:PNFP). All of these stocks’ market caps match SAM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HP 28 270247 -5
AGO 35 576379 -1
CBPO 14 504724 5
PNFP 15 84557 -3
Average 23 358977 -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 $359 million. That figure was $661 million in SAM’s case. Assured Guaranty Ltd. (NYSE:AGO) is the most popular stock in this table. On the other hand China Biologic Products Holdings, Inc. (NASDAQ:CBPO) 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. 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. Hedge funds were also right about betting on SAM as the stock returned 56.9% in 2019 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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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