Blackberry Ltd (BBRY): 33% Spike in Smart Money Ownership

You probably think that hedge funds’ long picks aren’t beating the market because of their high profile losses in Valeant or energy stocks. You’d be wrong. We track more than 800 equity hedge funds and create a giant portfolio of their long holdings. This $1.6 trillion portfolio of large and small-cap stocks lost 4.7% through the end of February, which outperformed the S&P 500 Total Return Index’s 5.2% loss. The small-cap index Russell 2000 did even worse, losing 8.8% during the same period. In this article, we are going to take a look at the hedge fund sentiment surrounding Blackberry Ltd (NASDAQ:BBRY).

Is Blackberry Ltd (NASDAQ:BBRY) the right investment to pursue these days? Investors who are in the know seem to think so. The number of long hedge fund positions in the stock was up by 33% during the fourth quarter. BBRY was in 24 hedge funds’ portfolios at the end of the fourth quarter, with those positions being valued at over $786 million. There were 18 hedge funds in our database with BBRY positions at the end of the previous quarter, when their stakes amounted to just $470 million in shares. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Old Republic International Corporation (NYSE:ORI), and Envision Healthcare Holdings Inc (NYSE:EVHC) to gather more data points.

Why is Smart Money Growing Fonder of BlackBerry Ltd (NASDAQ:BBRY)?

After a strong close to 2015 which saw its shares gain 50% and prompted the aforementioned influx of smart money into the stock, BlackBerry has fallen victim to the broader tech and market selloffs in early 2016, shedding nearly 15% of its value. Coming off of solid fiscal year 2016 third quarter results, which it posted on December 18, the Canadian tech company continues its transition from a smartphone maker into a software company. In addition to its already strong focus on security software, which has been augmented by the recent purchases of cyber security firm Encription and security software maker Good Technology, BlackBerry is also preparing to plunge into the self-driving vehicle arena, where its security acumen should prove invaluable. An interesting rumor has surfaced on that front that Apple Inc. (NASDAQ:AAPL) and BlackBerry could be planning a self-driving vehicle collaboration, after the Ottawa Business Journal reported that Apple will open an office in Kanata, Ontario (a suburb of Ottawa) which just happens to be where BlackBerry’s QNX Software Systems, its automotive division, is located.

Although its P/E is rather high at 129, BlackBerry is trading not much higher than its book value, with a price-to-book ratio of just 1.19, thanks to abundant cash reserves of about $2.5 billion, which the company plans to maintain. Given its intriguing push into a high-growth segment and the potential for BlackBerry to be the target of a takeover, the stock appears to be an attractive buy-low option at the moment.

With that in mind, let’s review the latest smart money action surrounding Blackberry Ltd (NASDAQ:BBRY).

What have hedge funds been doing with Blackberry Ltd (NASDAQ:BBRY)?

At Q4’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 33% rise from one quarter earlier. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or had already accumulated large positions).

According to Insider Monkey’s hedge fund database, Fairfax Financial Holdings, managed by Prem Watsa, holds the biggest position in Blackberry Ltd (NASDAQ:BBRY). Fairfax Financial Holdings has a $433.3 million position in the stock, comprising 35.2% of its 13F portfolio. Coming in second is Renaissance Technologies, led by Jim Simons, holding a $122.4 million position; 0.3% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Irving Kahn’s Kahn Brothers.

Consequently, some big names have been driving this bullishness. Sabal Capital Management, managed by William Charters and Mario Marcon, initiated the most outsized position in Blackberry Ltd (NASDAQ:BBRY). Sabal Capital Management had $5.1 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also initiated a $2 million position during the quarter. The other funds with brand new BBRY positions are Larry Petrella and Michael Siminerio’s PineView Asset Management, Neal Shah’s Valtura Capital Partners, and George Hall’s Clinton Group.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Blackberry Ltd (NASDAQ:BBRY) but similarly valued. These stocks are Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Old Republic International Corporation (NYSE:ORI), Envision Healthcare Holdings Inc (NYSE:EVHC), and Keysight Technologies Inc (NYSE:KEYS). This group of stocks’ market caps are closest to BBRY’s market cap.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $580 million. That figure was $786 million in BBRY’s case. Neurocrine Biosciences, Inc. (NASDAQ:NBIX) is the most popular stock in this table. On the other hand Keysight Technologies Inc (NYSE:KEYS) is the least popular one with only 17 bullish hedge fund positions. Blackberry Ltd (NASDAQ:BBRY) is not the least popular stock in this group but hedge fund interest is still below average, although the total amount of capital invested in the stock is above average. Given that it was the only stock on the list to see a very positive influx of smart money ownership, it may be worth considering a long position in the company.