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Were Hedge Funds Right About The Boston Beer Company Inc (SAM)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtThe Boston Beer Company Inc (NYSE:SAM) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is The Boston Beer Company Inc (NYSE:SAM) a sound stock to buy now? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund bets dropped by 2 lately. Our calculations also showed that SAM 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). SAM was in 24 hedge funds’ portfolios at the end of March. There were 26 hedge funds in our database with SAM positions at the end of the previous quarter.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Brad Farber Atika Capital

Brad Farber of Atika Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Now we’re going to take a gander at the recent hedge fund action encompassing The Boston Beer Company Inc (NYSE:SAM).

What have hedge funds been doing with The Boston Beer Company Inc (NYSE:SAM)?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SAM over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is SAM A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the number one position in The Boston Beer Company Inc (NYSE:SAM), worth close to $204.5 million, accounting for 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $76.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers that hold long positions encompass Cliff Asness’s AQR Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Rip Road Capital allocated the biggest weight to The Boston Beer Company Inc (NYSE:SAM), around 4.1% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, designating 0.75 percent of its 13F equity portfolio to SAM.

Due to the fact that The Boston Beer Company Inc (NYSE:SAM) has witnessed a decline in interest from hedge fund managers, logic holds that there is a sect of hedge funds who sold off their full holdings in the first quarter. At the top of the heap, Charles Clough’s Clough Capital Partners said goodbye to the biggest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $3.2 million in stock, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital was right behind this move, as the fund dropped about $1.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds in the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The Boston Beer Company Inc (NYSE:SAM) but similarly valued. These stocks are Berry Global Group Inc (NYSE:BERY), PLDT Inc. (NYSE:PHI), IDACORP Inc (NYSE:IDA), and Store Capital Corporation (NYSE:STOR). This group of stocks’ market values are similar to SAM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BERY 34 1206553 -13
PHI 7 74090 0
IDA 24 282100 0
STOR 25 443966 5
Average 22.5 501677 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $502 million. That figure was $558 million in SAM’s case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 7 bullish hedge fund positions. The Boston Beer Company Inc (NYSE:SAM) is not the most popular stock in this group but hedge fund interest is still above 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on SAM as the stock returned 46% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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