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BWX Technologies Inc (BWXT): Hedge Funds Are Nibbling

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at 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. In this article we look at what those investors think of BWX Technologies Inc (NYSE:BWXT).

BWX Technologies Inc (NYSE:BWXT) has seen an increase in hedge fund interest lately. Our calculations also showed that BWXT 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.

Ken Griffin

Ken Griffin of Citadel Investment Group

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 take a look at the new hedge fund action regarding BWX Technologies Inc (NYSE:BWXT).

What does smart money think about BWX Technologies Inc (NYSE:BWXT)?

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in BWXT over the last 18 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Is BWXT A Good Stock To Buy?

More specifically, Cardinal Capital was the largest shareholder of BWX Technologies Inc (NYSE:BWXT), with a stake worth $40.4 million reported as of the end of September. Trailing Cardinal Capital was Marshall Wace LLP, which amassed a stake valued at $10.7 million. Balyasny Asset Management, Citadel Investment Group, and Mountaineer Partners 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 Mountaineer Partners Management allocated the biggest weight to BWX Technologies Inc (NYSE:BWXT), around 9.49% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, dishing out 1.99 percent of its 13F equity portfolio to BWXT.

As industrywide interest jumped, specific money managers have been driving this bullishness. Cardinal Capital, managed by Amy Minella, assembled the most valuable position in BWX Technologies Inc (NYSE:BWXT). Cardinal Capital had $40.4 million invested in the company at the end of the quarter. Steven Boyd’s Armistice Capital also initiated a $4.9 million position during the quarter. The following funds were also among the new BWXT investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Michael Gelband’s ExodusPoint Capital, and Greg Eisner’s Engineers Gate Manager.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as BWX Technologies Inc (NYSE:BWXT) but similarly valued. We will take a look at Tech Data Corp (NASDAQ:TECD), Old Republic International Corporation (NYSE:ORI), Caesars Entertainment Corp (NASDAQ:CZR), and HD Supply Holdings Inc (NASDAQ:HDS). This group of stocks’ market valuations match BWXT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TECD 39 797204 5
ORI 27 241456 7
CZR 47 2040793 1
HDS 40 856283 2
Average 38.25 983934 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $984 million. That figure was $108 million in BWXT’s case. Caesars Entertainment Corp (NASDAQ:CZR) is the most popular stock in this table. On the other hand Old Republic International Corporation (NYSE:ORI) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks BWX Technologies Inc (NYSE:BWXT) is even less popular than ORI. Hedge funds clearly dropped the ball on BWXT 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on BWXT as the stock returned 28.8% so far 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.