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Brunswick Corporation (BC): Hedge Funds Taking Some Chips Off The Table

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 first 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 4.5 years and analyze what the smart money thinks of Brunswick Corporation (NYSE:BC) based on that data.

Brunswick Corporation (NYSE:BC) was in 23 hedge funds’ portfolios at the end of March. BC shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. There were 36 hedge funds in our database with BC positions at the end of the previous quarter. Our calculations also showed that BC 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

William Von Mueffling - Cantillon Capital Management

William Von Mueffling of Cantillon Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s review the key hedge fund action regarding Brunswick Corporation (NYSE:BC).

What have hedge funds been doing with Brunswick Corporation (NYSE:BC)?

Heading into the second quarter of 2020, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from the fourth quarter of 2019. By comparison, 27 hedge funds held shares or bullish call options in BC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Cantillon Capital Management, managed by William von Mueffling, holds the largest position in Brunswick Corporation (NYSE:BC). Cantillon Capital Management has a $133 million position in the stock, comprising 1.5% of its 13F portfolio. Coming in second is Anthony Bozza of Lakewood Capital Management, with a $108.3 million position; 5% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Cliff Asness’s AQR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Lakewood Capital Management allocated the biggest weight to Brunswick Corporation (NYSE:BC), around 4.95% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, designating 1.64 percent of its 13F equity portfolio to BC.

Due to the fact that Brunswick Corporation (NYSE:BC) has faced declining sentiment from hedge fund managers, logic holds that there was a specific group of funds who were dropping their full holdings last quarter. Intriguingly, Renaissance Technologies cut the biggest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $9.3 million in stock. Charles Lemonides’s fund, Valueworks LLC, also dumped its stock, about $6.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 13 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Brunswick Corporation (NYSE:BC). These stocks are CVB Financial Corp. (NASDAQ:CVBF), Ardagh Group S.A. (NYSE:ARD), ACI Worldwide Inc (NASDAQ:ACIW), and Novanta Inc. (NASDAQ:NOVT). This group of stocks’ market values are closest to BC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CVBF 8 40046 -6
ARD 8 48967 -1
ACIW 24 271686 4
NOVT 10 20986 -4
Average 12.5 95421 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $411 million in BC’s case. ACI Worldwide Inc (NASDAQ:ACIW) is the most popular stock in this table. On the other hand CVB Financial Corp. (NASDAQ:CVBF) is the least popular one with only 8 bullish hedge fund positions. Brunswick Corporation (NYSE:BC) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on BC as the stock returned 69.3% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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