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Barings BDC, Inc. (BBDC): Are Hedge Funds Right About This Stock?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Barings BDC, Inc. (NYSE:BBDC) based on that data.

Is Barings BDC, Inc. (NYSE:BBDC) worth your attention right now? The best stock pickers are in a bearish mood. The number of long hedge fund positions were trimmed by 3 in recent months. Our calculations also showed that BBDC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). BBDC was in 10 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with BBDC holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are many formulas stock market investors have at their disposal to analyze their holdings. Two of the less utilized formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the top fund managers can outclass the S&P 500 by a very impressive amount (see the details here).

Izzy Englander of MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to view the new hedge fund action surrounding Barings BDC, Inc. (NYSE:BBDC).

How have hedgies been trading Barings BDC, Inc. (NYSE:BBDC)?

Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in BBDC a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is BBDC A Good Stock To Buy?

Among these funds, Clough Capital Partners held the most valuable stake in Barings BDC, Inc. (NYSE:BBDC), which was worth $10.5 million at the end of the third quarter. On the second spot was Weiss Asset Management which amassed $6.5 million worth of shares. Millennium Management, Citadel Investment Group, and McKinley Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Clough Capital Partners allocated the biggest weight to Barings BDC, Inc. (NYSE:BBDC), around 0.87% of its 13F portfolio. Weiss Asset Management is also relatively very bullish on the stock, designating 0.52 percent of its 13F equity portfolio to BBDC.

Because Barings BDC, Inc. (NYSE:BBDC) has experienced bearish sentiment from the smart money, it’s safe to say that there were a few hedgies who sold off their full holdings by the end of the third quarter. It’s worth mentioning that Michael Gelband’s ExodusPoint Capital sold off the biggest investment of all the hedgies followed by Insider Monkey, valued at about $0.3 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also dropped its stock, about $0.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks similar to Barings BDC, Inc. (NYSE:BBDC). These stocks are Amalgamated Bank (NASDAQ:AMAL), Energy Recovery, Inc. (NASDAQ:ERII), Ethan Allen Interiors Inc. (NYSE:ETH), and Changyou.Com Ltd (NASDAQ:CYOU). This group of stocks’ market valuations are closest to BBDC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMAL 12 60603 5
ERII 10 47610 0
ETH 14 62893 -2
CYOU 13 38009 4
Average 12.25 52279 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $30 million in BBDC’s case. Ethan Allen Interiors Inc. (NYSE:ETH) is the most popular stock in this table. On the other hand Energy Recovery, Inc. (NASDAQ:ERII) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Barings BDC, Inc. (NYSE:BBDC) is even less popular than ERII. Hedge funds dodged a bullet by taking a bearish stance towards BBDC. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BBDC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BBDC investors were disappointed as the stock returned 2.6% during the fourth quarter (through the end of November) 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 among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

Disclosure: None. This article was originally published at Insider Monkey.

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