Move over Diageo (DEO), the hedge funds have spoken.
Diageo and other distilled beverage companies (i.e. they make whisky, vodka, and the like) are dwindling as an investment. Diageo had 15 hedge funds invested in the company at the end of the second quarter – combined, their holdings were worth an impressive $553.58 million. But, times always change. In Diageo’s case, three hedge funds sold out of their positions in the company, including Ken Griffin’s Citadel Investment Group and Louis Bacon’s Moore Global Investments. The changes brought the total number of hedge funds invested in Diageo at the end of the third quarter down to 12, slashing the volume of hedge fund investment in the company to a “mere” $410.29 million.
Hedge funds also moved away from Brown-Forman (BF) and Constellation Brands, Inc. (STZ) in the third quarter. Hedge fund investment in Constellation fell from $118.05 million spread across 16 funds at the end of the second quarter to finish the third quarter with just $74.86 million across 15 hedge funds invested in the company. Hedge fund managers like Ray Dalio may have upped his Bridgewater Associates’ position in Constellation by +206% in the third quarter, but that means the fund had only $19.33 million invested in Constellation at the end of September.
Brown-Forman fared a little better. Hedge fund investment in the company only slipped marginally in the third quarter, going from $223.92 million across 16 funds at the end of the second quarter to $212.80 million across 11 funds. But, most of that is Tom Russo’s Gardner Russo & Gardner. The fund had $117.42 million invested in the company at the end of September after upping its stake by +2% in the third quarter. Several hedge funds sold out of their positions in Brown-Forman during the third quarter, including Ray Dalio’s Bridgewater Associates.
Instead, hedge funds are turning to breweries.
In the third quarter, hedge fund investment increased significantly in breweries across the board, but especially those with higher market caps. Take Anheuser-Busch Inbev SA NV (affectionately known as BUD in the stock market). It had had 19 hedge funds invested in positions worth over $486.33 million at the end of the second quarter. As respectable as that number was, it increased by roughly 50% from the end of June to the end of September, weighing in at $720.11 million in total hedge fund investment, spread across 24 hedge funds. Tom Russo’s Gardner Russo & Gardner, Robert Rodriguez and Steven Romick’s First Pacific Advisors and Jeffrey Tannenbaum’s Fir Tree are each fans of Brown-Forman.
Smaller breweries had similar success. Fomento Economico Mexicano S (FMX) went from having 11 funds invested in it, for a total value of $77.23 million, at the end of the second quarter to having $88.11 million in total hedge fund investment, spread across nine funds, at the end of the third quarter. Among those, Tom Russo’s Gardner Russo & Gardner was on board, as was Richard Driehaus’ Driehaus Capital and Christopher R. Hansen’s Valiant Capital.
Boston Beer Co., Inc. (SAM) was also popular with hedge funds in the third quarter. It went from having just $22.54 million across four hedge funds invested in it at the end of the second quarter to having $25.97 million across 10 hedge funds invested in the company at the end of September. Boston Beer was popular with Jim Simons’ Renaissance Technologies in the third quarter, as well as Israel Englander’s Millennium Management and Joel Greenblatt’s Gotham Asset Management.
Compania Cervecerias Unidas S A (CCU) also attracted some hedge fund interest in the third quarter. The stock went from having four hedge funds with $33.18 million invested in it to five hedge funds with $30.20 million invested, including Chase Coleman’s Tiger Global Managament, D.E. Shaw’s D E Shaw and Jim Simons’ Renaissance Technologies.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.