Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Reed’s, Inc. (NASDAQ:REED) in this article.
Is Reed’s (REED) a good stock to buy now? REED was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 6. REED shareholders have witnessed a decrease in enthusiasm from smart money in recent months. There were 6 hedge funds in our database with REED positions at the end of the second quarter. Our calculations also showed that REED 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.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 we’re going to view the latest hedge fund action surrounding Reed’s, Inc. (NASDAQ:REED).
What does smart money think about Reed’s, Inc. (NASDAQ:REED)?
Heading into the fourth quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 3 hedge funds with a bullish position in REED a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in Reed’s, Inc. (NASDAQ:REED). Royce & Associates has a $1.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $0.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers with similar optimism comprise Mark G. Schoeppner’s Quaker Capital Investments, Israel Englander’s Millennium Management and Peter Algert’s Algert Global. In terms of the portfolio weights assigned to each position Quaker Capital Investments allocated the biggest weight to Reed’s, Inc. (NASDAQ:REED), around 0.16% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to REED.
Due to the fact that Reed’s, Inc. (NASDAQ:REED) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few fund managers that slashed their positions entirely by the end of the third quarter. At the top of the heap, Constantinos J. Christofilis’s Archon Capital Management cut the largest investment of the 750 funds watched by Insider Monkey, worth close to $1.2 million in stock. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s fund, GRT Capital Partners, also said goodbye to its stock, about $0 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Reed’s, Inc. (NASDAQ:REED). We will take a look at Akarti Therapeutics PLC (NASDAQ:AKTX), Aware, Inc. (NASDAQ:AWRE), Anixa Biosciences, Inc. (NASDAQ:ANIX), Citius Pharmaceuticals, Inc. (NASDAQ:CTXR), Crown Crafts, Inc. (NASDAQ:CRWS), VAALCO Energy, Inc. (NYSE:EGY), and AstroNova, Inc. (NASDAQ:ALOT). This group of stocks’ market caps resemble REED’s market cap.
|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 4 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $3 million in REED’s case. AstroNova, Inc. (NASDAQ:ALOT) is the most popular stock in this table. On the other hand Akarti Therapeutics PLC (NASDAQ:AKTX) is the least popular one with only 1 bullish hedge fund positions. Reed’s, Inc. (NASDAQ:REED) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for REED is 57.6. 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. 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 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 November 27th and beat the market again by 16.1 percentage points. Unfortunately REED wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on REED were disappointed as the stock returned -36.6% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.