Is Compania Cervecerias Unidas S.A. (CCU) A Good Stock To Buy ?

Nina Todic

Mon, Oct 14, 2019, 6:42 PM

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have gone over 730 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 June 28th. In this article we look at what those investors think of Compania Cervecerias Unidas S.A. (NYSE:CCU).

Is Compania Cervecerias Unidas S.A. (NYSE:CCU) a buy here? Money managers are becoming less hopeful. The number of bullish hedge fund bets retreated by 1 in recent months. Our calculations also showed that CCU isn't among the 30 most popular stocks among hedge funds. CCU was in 10 hedge funds' portfolios at the end of June. There were 11 hedge funds in our database with CCU holdings at the end of the previous quarter.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a glance at the new hedge fund action surrounding Compania Cervecerias Unidas S.A. (NYSE:CCU).

What does smart money think about Compania Cervecerias Unidas S.A. (NYSE:CCU)?

At the end of the second quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in CCU over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the number one position in Compania Cervecerias Unidas S.A. (NYSE:CCU), worth close to $36.5 million, amounting to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, led by Cliff Asness, holding a $10.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions include Renaissance Technologies, Israel Englander's Millennium Management and Chuck Royce's Royce & Associates.

Judging by the fact that Compania Cervecerias Unidas S.A. (NYSE:CCU) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of fund managers that elected to cut their positions entirely by the end of the second quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group dropped the biggest stake of the "upper crust" of funds followed by Insider Monkey, worth close to $4 million in stock, and Michael Platt and William Reeves's BlueCrest Capital Mgmt. was right behind this move, as the fund dropped about $0.6 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds by the end of the second quarter.

Let's also examine hedge fund activity in other stocks similar to Compania Cervecerias Unidas S.A. (NYSE:CCU). We will take a look at Primerica, Inc. (NYSE:PRI), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), First Citizens BancShares Inc. (NASDAQ:FCNCA), and MDU Resources Group Inc (NYSE:MDU). This group of stocks' market values resemble CCU's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRI,26,334200,14 LECO,22,279642,-4 FCNCA,17,144918,-1 MDU,21,307440,3 Average,21.5,266550,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $267 million. That figure was $69 million in CCU's case. Primerica, Inc. (NYSE:PRI) is the most popular stock in this table. On the other hand First Citizens BancShares Inc. (NASDAQ:FCNCA) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Compania Cervecerias Unidas S.A. (NYSE:CCU) is even less popular than FCNCA. Hedge funds dodged a bullet by taking a bearish stance towards CCU. 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 CCU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); CCU investors were disappointed as the stock returned -21.5% 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 (view the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019.