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Did Hedge Funds Make The Right Call On BGC Partners, Inc. (BGCP) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards BGC Partners, Inc. (NASDAQ:BGCP) at the end of the first quarter and determine whether the smart money was really smart about this stock.

BGC Partners, Inc. (NASDAQ:BGCP) has seen an increase in hedge fund sentiment lately. Our calculations also showed that BGCP 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.

In the eyes of most investors, hedge funds are assumed to be unimportant, old investment vehicles of yesteryear. While there are over 8000 funds in operation at present, Our researchers hone in on the top tier of this group, about 850 funds. These hedge fund managers command bulk of all hedge funds’ total asset base, and by tailing their inimitable investments, Insider Monkey has unsheathed a few investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Clint Carlson of Carlson Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Now we’re going to review the new hedge fund action regarding BGC Partners, Inc. (NASDAQ:BGCP).

Hedge fund activity in BGC Partners, Inc. (NASDAQ:BGCP)

At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in BGCP a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BGCP A Good Stock To Buy?

The largest stake in BGC Partners, Inc. (NASDAQ:BGCP) was held by Cardinal Capital, which reported holding $38.5 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $37.2 million position. Other investors bullish on the company included Rubric Capital Management, Alyeska Investment Group, and Horizon Asset Management. In terms of the portfolio weights assigned to each position Cruiser Capital Advisors allocated the biggest weight to BGC Partners, Inc. (NASDAQ:BGCP), around 3.66% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, dishing out 2.3 percent of its 13F equity portfolio to BGCP.

As one would reasonably expect, key hedge funds were breaking ground themselves. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, created the biggest position in BGC Partners, Inc. (NASDAQ:BGCP). LMR Partners had $1.1 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $0.6 million position during the quarter. The other funds with brand new BGCP positions are Greg Eisner’s Engineers Gate Manager, Clint Carlson’s Carlson Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks similar to BGC Partners, Inc. (NASDAQ:BGCP). We will take a look at Beam Therapeutics Inc. (NASDAQ:BEAM), Opko Health Inc. (NYSE:OPK), NanoString Technologies Inc (NASDAQ:NSTG), and Skyline Champion Corporation (NYSE:SKY). This group of stocks’ market valuations resemble BGCP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BEAM 11 157065 11
OPK 13 9526 -3
NSTG 18 118794 3
SKY 23 143480 -3
Average 16.25 107216 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $107 million. That figure was $143 million in BGCP’s case. Skyline Champion Corporation (NYSE:SKY) is the most popular stock in this table. On the other hand Beam Therapeutics Inc. (NASDAQ:BEAM) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks BGC Partners, Inc. (NASDAQ:BGCP) is more popular among hedge funds. 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. Unfortunately BGCP wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BGCP were disappointed as the stock returned 9.1% during the second quarter 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.