At Insider Monkey, we pore over the filings of nearly 887 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31st. In this article, we will use that wealth of knowledge to determine whether or not Starbucks Corporation (NASDAQ:SBUX) makes for a good investment right now.
Is SBUX a buy or sell? Starbucks Corporation (NASDAQ:SBUX) shareholders have witnessed an increase in support from the world’s most elite money managers lately. Starbucks Corporation (NASDAQ:SBUX) was in 67 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 68. Our calculations also showed that SBUX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In today’s marketplace there are many metrics investors have at their disposal to size up their stock investments. A couple of the most under-the-radar metrics are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a significant margin (see the details here).
Bill Ackman of Pershing Square
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best hydrogen fuel cell 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 (or at the end of this article). Keeping this in mind we’re going to take a peek at the key hedge fund action encompassing Starbucks Corporation (NASDAQ:SBUX).
Do Hedge Funds Think SBUX Is A Good Stock To Buy Now?
At Q4’s end, a total of 67 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. By comparison, 66 hedge funds held shares or bullish call options in SBUX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Starbucks Corporation (NASDAQ:SBUX) was held by Fundsmith LLP, which reported holding $1117 million worth of stock at the end of December. It was followed by Pershing Square with a $1077.3 million position. Other investors bullish on the company included Fisher Asset Management, Cedar Rock Capital, and Duquesne Capital. In terms of the portfolio weights assigned to each position Pacifica Capital Investments allocated the biggest weight to Starbucks Corporation (NASDAQ:SBUX), around 16.22% of its 13F portfolio. Cedar Rock Capital is also relatively very bullish on the stock, earmarking 15.22 percent of its 13F equity portfolio to SBUX.
As aggregate interest increased, key money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in Starbucks Corporation (NASDAQ:SBUX). Balyasny Asset Management had $66.2 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $19.2 million position during the quarter. The other funds with brand new SBUX positions are Jason McDougall’s 11 Capital Partners, Kerr Neilson’s Platinum Asset Management, and Elise Di Vincenzo Crumbine’s Stormborn Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Starbucks Corporation (NASDAQ:SBUX) but similarly valued. We will take a look at Sony Corporation (NYSE:SNE), Wells Fargo & Company (NYSE:WFC), Morgan Stanley (NYSE:MS), Sanofi (NASDAQ:SNY), The Boeing Company (NYSE:BA), Lowe’s Companies, Inc. (NYSE:LOW), and China Mobile Limited (NYSE:CHL). This group of stocks’ market values resemble SBUX’s market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNE,28,593971,2 WFC,99,8748819,9 MS,66,5665191,-4 SNY,15,1145189,-5 BA,55,1057323,12 LOW,71,5192115,-12 CHL,13,275668,3 Average,49.6,3239754,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 49.6 hedge funds with bullish positions and the average amount invested in these stocks was $3240 million. That figure was $4991 million in SBUX’s case. Wells Fargo & Company (NYSE:WFC) is the most popular stock in this table. On the other hand China Mobile Limited (NYSE:CHL) is the least popular one with only 13 bullish hedge fund positions. Starbucks Corporation (NASDAQ:SBUX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SBUX is 67. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7% in 2021 through March 12th and beat the market again by 1.6 percentage points. Unfortunately SBUX wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on SBUX were disappointed as the stock returned 1.2% since the end of December (through 3/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.