How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Beyond Meat, Inc. (NASDAQ:BYND) and determine whether hedge funds had an edge regarding this stock.
Beyond Meat, Inc. (NASDAQ:BYND) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. Our calculations also showed that BYND 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 states that pay the most federal taxes to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s review the key hedge fund action surrounding Beyond Meat, Inc. (NASDAQ:BYND).
How have hedgies been trading Beyond Meat, Inc. (NASDAQ:BYND)?
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -32% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BYND over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Beyond Meat, Inc. (NASDAQ:BYND), with a stake worth $56.8 million reported as of the end of September. Trailing Citadel Investment Group was Coatue Management, which amassed a stake valued at $34.5 million. Alkeon Capital Management, Citadel Investment Group, and Renaissance Technologies 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 Atika Capital allocated the biggest weight to Beyond Meat, Inc. (NASDAQ:BYND), around 0.55% of its 13F portfolio. Coatue Management is also relatively very bullish on the stock, designating 0.44 percent of its 13F equity portfolio to BYND.
Judging by the fact that Beyond Meat, Inc. (NASDAQ:BYND) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of fund managers that decided to sell off their entire stakes in the first quarter. Interestingly, Larry Chen and Terry Zhang’s Tairen Capital said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, valued at close to $10.4 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund said goodbye to about $2.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 6 funds in the first quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Beyond Meat, Inc. (NASDAQ:BYND) but similarly valued. These stocks are Syneos Health, Inc. (NASDAQ:SYNH), The Mosaic Company (NYSE:MOS), 51job, Inc. (NASDAQ:JOBS), and Teck Resources Ltd (NYSE:TECK). This group of stocks’ market values are closest to BYND’s market value.
|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 21 hedge funds with bullish positions and the average amount invested in these stocks was $199 million. That figure was $91 million in BYND’s case. The Mosaic Company (NYSE:MOS) is the most popular stock in this table. On the other hand 51job, Inc. (NASDAQ:JOBS) is the least popular one with only 9 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 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on BYND as the stock returned 118.2% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.