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Were Hedge Funds Right About Dumping New Age Beverages Corporation (NBEV)?

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the second quarter and hedging or reducing many of their long positions. Some fund managers like this one are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding New Age Beverages Corporation (NASDAQ:NBEV).

New Age Beverages Corporation (NASDAQ:NBEV) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. NBEV was in 4 hedge funds’ portfolios at the end of the second quarter of 2019. There were 8 hedge funds in our database with NBEV holdings at the end of the previous quarter. Our calculations also showed that NBEV isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

NBEV_oct2019

Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let’s review the new hedge fund action encompassing New Age Beverages Corporation (NASDAQ:NBEV).

How are hedge funds trading New Age Beverages Corporation (NASDAQ:NBEV)?

At Q2’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -50% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in NBEV over the last 16 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

David Harding

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, OZ Management, holds the biggest position in New Age Beverages Corporation (NASDAQ:NBEV). OZ Management has a $1.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $0.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers that are bullish encompass Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and David Harding’s Winton Capital Management.

Because New Age Beverages Corporation (NASDAQ:NBEV) has faced falling interest from hedge fund managers, it’s easy to see that there is a sect of fund managers that slashed their full holdings in the second quarter. Interestingly, Benjamin A. Smith’s Laurion Capital Management cut the largest position of the 750 funds watched by Insider Monkey, totaling an estimated $3.3 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also cut its stock, about $0.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds in the second quarter.

Let’s check out hedge fund activity in other stocks similar to New Age Beverages Corporation (NASDAQ:NBEV). We will take a look at Carriage Services, Inc. (NYSE:CSV), Steel Partners Holdings LP (NYSE:SPLP), Senseonics Holdings, Inc. (NYSE:SENS), and Rafael Holdings, Inc. (NYSE:RFL). This group of stocks’ market values resemble NBEV’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSV 9 33467 1
SPLP 5 30602 -1
SENS 9 6408 -1
RFL 6 55516 -2
Average 7.25 31498 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $31 million. That figure was $2 million in NBEV’s case. Carriage Services, Inc. (NYSE:CSV) is the most popular stock in this table. On the other hand Steel Partners Holdings LP (NYSE:SPLP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks New Age Beverages Corporation (NASDAQ:NBEV) is even less popular than SPLP. Hedge funds dodged a bullet by taking a bearish stance towards NBEV. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NBEV wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NBEV investors were disappointed as the stock returned -40.8% during the third quarter 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 in 2019.

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

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