Is Keurig Dr Pepper Inc. (KDP) A Good Stock To Buy?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Keurig Dr Pepper Inc. (NASDAQ:KDP) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is KDP a good stock to buy? Money managers were getting more optimistic. The number of bullish hedge fund bets rose by 1 recently. Keurig Dr Pepper Inc. (NASDAQ:KDP) was in 30 hedge funds’ portfolios at the end of March. The all time high for this statistic is 41. Our calculations also showed that KDP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Lee Ainslie's Top 10 Stock Picks

Lee Ainslie of Maverick Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to analyze the key hedge fund action surrounding Keurig Dr Pepper Inc. (NASDAQ:KDP).

Do Hedge Funds Think KDP Is A Good Stock To Buy Now?

At first quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the fourth quarter of 2020. By comparison, 30 hedge funds held shares or bullish call options in KDP a year ago. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Is KDP A Good Stock To Buy?

The largest stake in Keurig Dr Pepper Inc. (NASDAQ:KDP) was held by Cedar Rock Capital, which reported holding $307.5 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $217 million position. Other investors bullish on the company included Renaissance Technologies, Tremblant Capital, 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 6.87% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, earmarking 2.32 percent of its 13F equity portfolio to KDP.

As one would reasonably expect, key money managers were breaking ground themselves. Tremblant Capital, managed by Brett Barakett, initiated the most valuable call position in Keurig Dr Pepper Inc. (NASDAQ:KDP). Tremblant Capital had $56.5 million invested in the company at the end of the quarter. Jonathan Soros’s JS Capital also initiated a $13.7 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Lee Ainslie’s Maverick Capital, and Jinghua Yan’s TwinBeech Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Keurig Dr Pepper Inc. (NASDAQ:KDP) but similarly valued. We will take a look at Newmont Corporation (NYSE:NEM), Monster Beverage Corp (NASDAQ:MNST), Marriott International Inc (NYSE:MAR), Enterprise Products Partners L.P. (NYSE:EPD), Freeport-McMoRan Inc. (NYSE:FCX), Ford Motor Company (NYSE:F), and ING Groep N.V. (NYSE:ING). This group of stocks’ market valuations are closest to KDP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NEM 43 994802 -7
MNST 45 2382495 1
MAR 58 3068754 0
EPD 26 299289 -4
FCX 68 3290981 7
F 49 2197658 8
ING 10 532082 1
Average 42.7 1823723 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.7 hedge funds with bullish positions and the average amount invested in these stocks was $1824 million. That figure was $935 million in KDP’s case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand ING Groep N.V. (NYSE:ING) is the least popular one with only 10 bullish hedge fund positions. Keurig Dr Pepper Inc. (NASDAQ:KDP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KDP is 45.2. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately KDP wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); KDP investors were disappointed as the stock returned 2.9% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.