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Did Hedge Funds Make The Right Call On BHP Group (BHP) ?

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. 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 we look at how hedge funds traded BHP Group (NYSE:BHP) and determine whether the smart money was really smart about this stock.

BHP Group (NYSE:BHP) shareholders have witnessed a decrease in hedge fund sentiment recently. BHP was in 18 hedge funds’ portfolios at the end of March. There were 20 hedge funds in our database with BHP positions at the end of the previous quarter. Our calculations also showed that BHP 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 financial world there are a large number of gauges stock market investors have at their disposal to size up their stock investments. Some of the most under-the-radar gauges are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top hedge fund managers can beat the broader indices by a superb amount (see the details here).

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to analyze the latest hedge fund action surrounding BHP Group (NYSE:BHP).

How are hedge funds trading BHP Group (NYSE:BHP)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in BHP over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BHP A Good Stock To Buy?

Among these funds, Fisher Asset Management held the most valuable stake in BHP Group (NYSE:BHP), which was worth $269.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $114.7 million worth of shares. D E Shaw, Athos Capital, and Citadel Investment Group 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 Athos Capital allocated the biggest weight to BHP Group (NYSE:BHP), around 12.13% of its 13F portfolio. Sensato Capital Management is also relatively very bullish on the stock, designating 3.04 percent of its 13F equity portfolio to BHP.

Seeing as BHP Group (NYSE:BHP) has faced a decline in interest from hedge fund managers, it’s easy to see that there exists a select few hedge funds that decided to sell off their entire stakes last quarter. At the top of the heap, Simon Sadler’s Segantii Capital dropped the biggest investment of the 750 funds monitored by Insider Monkey, comprising about $43 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $6.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to BHP Group (NYSE:BHP). We will take a look at Linde plc (NYSE:LIN), Citigroup Inc. (NYSE:C), Royal Bank of Canada (NYSE:RY), and Anheuser-Busch InBev SA/NV (NYSE:BUD). This group of stocks’ market values match BHP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LIN 53 3350656 6
C 86 5494249 -12
RY 16 138801 -4
BUD 17 877182 -6
Average 43 2465222 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $2465 million. That figure was $461 million in BHP’s case. Citigroup Inc. (NYSE:C) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 16 bullish hedge fund positions. BHP Group (NYSE:BHP) is not the least popular stock in this group but hedge fund interest is still below 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on BHP as the stock returned 48.2% since the end of March and outperformed the market by an even larger margin.

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