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Did Hedge Funds Drop The Ball On Ballard Power Systems Inc. (BLDP) ?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ballard Power Systems Inc. (NASDAQ:BLDP).

Ballard Power Systems Inc. (NASDAQ:BLDP) investors should pay attention to an increase in hedge fund interest lately. BLDP was in 6 hedge funds’ portfolios at the end of September. There were 4 hedge funds in our database with BLDP positions at the end of the previous quarter. Our calculations also showed that BLDP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

Joel Greenblatt of Gotham Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s review the key hedge fund action regarding Ballard Power Systems Inc. (NASDAQ:BLDP).

How are hedge funds trading Ballard Power Systems Inc. (NASDAQ:BLDP)?

Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BLDP over the last 17 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

Among these funds, Renaissance Technologies held the most valuable stake in Ballard Power Systems Inc. (NASDAQ:BLDP), which was worth $1.8 million at the end of the third quarter. On the second spot was D E Shaw which amassed $0.5 million worth of shares. Manatuck Hill Partners, Citadel Investment Group, and Millennium 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 Manatuck Hill Partners allocated the biggest weight to Ballard Power Systems Inc. (NASDAQ:BLDP), around 0.21% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0016 percent of its 13F equity portfolio to BLDP.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Renaissance Technologies, initiated the largest position in Ballard Power Systems Inc. (NASDAQ:BLDP). Renaissance Technologies had $1.8 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also initiated a $0.5 million position during the quarter. The only other fund with a brand new BLDP position is Joel Greenblatt’s Gotham Asset Management.

Let’s now take a look at hedge fund activity in other stocks similar to Ballard Power Systems Inc. (NASDAQ:BLDP). We will take a look at LendingClub Corp (NYSE:LC), Central European Media Enterprises Ltd. (NASDAQ:CETV), The Marcus Corporation (NYSE:MCS), and Coeur Mining, Inc. (NYSE:CDE). This group of stocks’ market caps are similar to BLDP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LC 8 3937 -2
CETV 10 13280 2
MCS 10 47370 -4
CDE 14 51790 4
Average 10.5 29094 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $3 million in BLDP’s case. Coeur Mining, Inc. (NYSE:CDE) is the most popular stock in this table. On the other hand LendingClub Corp (NYSE:LC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Ballard Power Systems Inc. (NASDAQ:BLDP) is even less popular than LC. Hedge funds clearly dropped the ball on BLDP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on BLDP as the stock returned 35.6% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

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

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