Blackstone Group Inc. (BX): Hedge Funds Were Right To Be Bearish

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 823 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about The Blackstone Group Inc. (NYSE:BX) in this article.

Is The Blackstone Group Inc. (NYSE:BX) a healthy stock for your portfolio? Money managers were in a bearish mood. The number of bullish hedge fund positions dropped by 2 lately. The Blackstone Group Inc. (NYSE:BX) was in 47 hedge funds’ portfolios at the end of June. The all time high for this statistics is 49. Our calculations also showed that BX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best artificial intelligence stocks to pick the best growth stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a peek at the recent hedge fund action surrounding The Blackstone Group Inc. (NYSE:BX).

What does smart money think about The Blackstone Group Inc. (NYSE:BX)?

Heading into the third quarter of 2020, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BX over the last 20 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, Egerton Capital Limited held the most valuable stake in The Blackstone Group Inc. (NYSE:BX), which was worth $216.9 million at the end of the third quarter. On the second spot was HMI Capital which amassed $188.1 million worth of shares. Millennium Management, Farallon Capital, and D E Shaw 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 Heard Capital allocated the biggest weight to The Blackstone Group Inc. (NYSE:BX), around 10.01% of its 13F portfolio. HMI Capital is also relatively very bullish on the stock, setting aside 8.97 percent of its 13F equity portfolio to BX.

Due to the fact that The Blackstone Group Inc. (NYSE:BX) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedgies that decided to sell off their entire stakes last quarter. Interestingly, Bill Ackman’s Pershing Square sold off the largest position of the 750 funds monitored by Insider Monkey, worth close to $25 million in stock. Lee Ainslie’s fund, Maverick Capital, also dropped its stock, about $22.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The Blackstone Group Inc. (NYSE:BX) but similarly valued. We will take a look at Stryker Corporation (NYSE:SYK), Intuitive Surgical, Inc. (NASDAQ:ISRG), Anthem Inc (NYSE:ANTM), Fiserv, Inc. (NASDAQ:FISV), Booking Holdings Inc. (NASDAQ:BKNG), Zoetis Inc (NYSE:ZTS), and VMware, Inc. (NYSE:VMW). This group of stocks’ market caps match BX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SYK 50 1257094 2
ISRG 43 1094503 -7
ANTM 69 4103137 -1
FISV 85 4642685 18
BKNG 96 6098595 6
ZTS 58 1985007 -2
VMW 42 696435 15
Average 63.3 2839637 4.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 63.3 hedge funds with bullish positions and the average amount invested in these stocks was $2840 million. That figure was $1434 million in BX’s case. Booking Holdings Inc. (NASDAQ:BKNG) is the most popular stock in this table. On the other hand VMware, Inc. (NYSE:VMW) is the least popular one with only 42 bullish hedge fund positions. The Blackstone Group Inc. (NYSE:BX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BX is 36.4. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and surpassed the market by 21 percentage points. Unfortunately BX wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BX investors were disappointed as the stock returned -2.9% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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