Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Keurig Dr Pepper Inc. (NASDAQ:KDP) changed recently.
Is KDP a good stock to buy now? Keurig Dr Pepper Inc. (NASDAQ:KDP) investors should pay attention to an increase in support from the world’s most elite money managers of late. Keurig Dr Pepper Inc. (NASDAQ:KDP) was in 41 hedge funds’ portfolios at the end of September. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KDP isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 66 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, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a glance at the fresh hedge fund action regarding Keurig Dr Pepper Inc. (NASDAQ:KDP).
Do Hedge Funds Think KDP Is A Good Stock To Buy Now?
At Q3’s end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in KDP a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Keurig Dr Pepper Inc. (NASDAQ:KDP) was held by Cedar Rock Capital, which reported holding $245.1 million worth of stock at the end of September. It was followed by Millennium Management with a $163.1 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Tremblant Capital. In terms of the portfolio weights assigned to each position Cedar Rock Capital allocated the biggest weight to Keurig Dr Pepper Inc. (NASDAQ:KDP), around 5.58% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, dishing out 3 percent of its 13F equity portfolio to KDP.
As one would reasonably expect, some big names were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in Keurig Dr Pepper Inc. (NASDAQ:KDP). Marshall Wace LLP had $78.9 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also made a $25.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Kevin Michael Ulrich and Anthony Davis’s Anchorage Advisors, and Joseph Samuels’s Islet Management.
Let’s now take a look at hedge fund activity in other stocks similar to Keurig Dr Pepper Inc. (NASDAQ:KDP). We will take a look at Snap Inc. (NYSE:SNAP), Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG), Carvana Co. (NYSE:CVNA), General Mills, Inc. (NYSE:GIS), Electronic Arts Inc. (NASDAQ:EA), Cognizant Technology Solutions Corp (NASDAQ:CTSH), and Bank of Montreal (NYSE:BMO). This group of stocks’ market valuations match KDP’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 37.9 hedge funds with bullish positions and the average amount invested in these stocks was $1878 million. That figure was $1214 million in KDP’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Sumitomo Mitsui Financial Grp, Inc. (NYSE:SMFG) is the least popular one with only 8 bullish hedge fund positions. Keurig Dr Pepper Inc. (NASDAQ:KDP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KDP is 70.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on KDP as the stock returned 10.6% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.