In this article we will take a look at whether hedge funds think Ambev SA (NYSE:ABEV) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Ambev SA (NYSE:ABEV) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ABEV isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare ABEV to other stocks including Canadian Imperial Bank of Commerce (NYSE:CM), Thomson Reuters Corporation (NYSE:TRI), and Baxter International Inc. (NYSE:BAX) to get a better sense of its popularity.
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Donald Yacktman of Yacktman Asset Management
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Do Hedge Funds Think ABEV Is A Good Stock To Buy Now?
At the end of March, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ABEV over the last 23 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Nicolai Tangen's Ako Capital has the number one position in Ambev SA (NYSE:ABEV), worth close to $89.9 million, amounting to 1.1% of its total 13F portfolio. Coming in second is Renaissance Technologies, holding a $58.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish include Kevin D. Eng's Columbus Hill Capital Management, Donald Yacktman's Yacktman Asset Management and Rob Cope's Columbus Point. In terms of the portfolio weights assigned to each position Columbus Point allocated the biggest weight to Ambev SA (NYSE:ABEV), around 4.02% of its 13F portfolio. Columbus Hill Capital Management is also relatively very bullish on the stock, dishing out 2.96 percent of its 13F equity portfolio to ABEV.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Orbis Investment Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Arrowstreet Capital).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Ambev SA (NYSE:ABEV) but similarly valued. We will take a look at Canadian Imperial Bank of Commerce (NYSE:CM), Thomson Reuters Corporation (NYSE:TRI), Baxter International Inc. (NYSE:BAX), Public Storage (NYSE:PSA), Johnson Controls International plc (NYSE:JCI), Align Technology, Inc. (NASDAQ:ALGN), and Ross Stores, Inc. (NASDAQ:ROST). All of these stocks' market caps are similar to ABEV's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CM,14,408020,1 TRI,28,395480,5 BAX,40,3357530,-2 PSA,26,929024,-5 JCI,41,1023861,7 ALGN,49,2831496,-1 ROST,48,976585,-9 Average,35.1,1417428,-0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.1 hedge funds with bullish positions and the average amount invested in these stocks was $1417 million. That figure was $229 million in ABEV's case. Align Technology, Inc. (NASDAQ:ALGN) is the most popular stock in this table. On the other hand Canadian Imperial Bank of Commerce (NYSE:CM) is the least popular one with only 14 bullish hedge fund positions. Ambev SA (NYSE:ABEV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ABEV is 33.2. 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. 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 28.5% in 2021 through July 23rd and beat the market by 10.1 percentage points. A small number of hedge funds were also right about betting on ABEV, though not to the same extent, as the stock returned 16.4% since the end of Q1 (through July 23rd) and outperformed the market.
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Disclosure: None. This article was originally published at Insider Monkey.