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BRP Inc. (DOOO): Hedge Funds Are Nibbling On

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtBRP Inc. (NASDAQ:DOOO) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is BRP Inc. (NASDAQ:DOOO) a first-rate investment right now? Prominent investors were getting more optimistic. The number of long hedge fund bets advanced by 1 lately. Our calculations also showed that DOOO isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the key hedge fund action regarding BRP Inc. (NASDAQ:DOOO).

Hedge fund activity in BRP Inc. (NASDAQ:DOOO)

Heading into the second quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DOOO over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Is DOOO A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the largest position in BRP Inc. (NASDAQ:DOOO), worth close to $19 million, corresponding to 0.1% of its total 13F portfolio. On Arrowstreet Capital’s heels is D E Shaw, managed by D. E. Shaw, which holds a $8.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise Renaissance Technologies, Paul Marshall and Ian Wace’s Marshall Wace LLP and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Marshall Wace LLP allocated the biggest weight to BRP Inc. (NASDAQ:DOOO), around 0.07% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to DOOO.

As industrywide interest jumped, specific money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the largest position in BRP Inc. (NASDAQ:DOOO). Adage Capital Management had $4.4 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made a $0.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BRP Inc. (NASDAQ:DOOO) but similarly valued. We will take a look at Trinseo S.A. (NYSE:TSE), Delphi Technologies PLC (NYSE:DLPH), Sculptor Capital Management, Inc. (NYSE:SCU), and Xperi Holding Corporation (NASDAQ:XPER). This group of stocks’ market values match DOOO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TSE 17 26358 -1
DLPH 19 105634 2
SCU 12 72077 0
XPER 20 108532 -3
Average 17 78150 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $78 million. That figure was $53 million in DOOO’s case. Xperi Holding Corporation (NASDAQ:XPER) is the most popular stock in this table. On the other hand Sculptor Capital Management, Inc. (NYSE:SCU) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks BRP Inc. (NASDAQ:DOOO) is even less popular than SCU. Hedge funds clearly dropped the ball on DOOO as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on DOOO as the stock returned 159.8% in the second quarter and outperformed the market by an even larger margin.

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