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Did Hedge Funds Make The Right Call On Bunge Limited (BG)?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Bunge Limited (NYSE:BG) and determine whether hedge funds had an edge regarding this stock.

Bunge Limited (NYSE:BG) investors should be aware of an increase in enthusiasm from smart money lately. BG was in 39 hedge funds’ portfolios at the end of March. There were 37 hedge funds in our database with BG positions at the end of the previous quarter. Our calculations also showed that BG 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.

According to most investors, hedge funds are viewed as slow, old financial tools of years past. While there are over 8000 funds with their doors open at present, Our researchers choose to focus on the top tier of this group, about 850 funds. These investment experts handle bulk of all hedge funds’ total asset base, and by watching their first-class equity investments, Insider Monkey has uncovered several investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually 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 .

Philip Hempleman Ardsley Partners

Philip Hempleman of Ardsley Partners

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. With all of this in mind we’re going to go over the fresh hedge fund action encompassing Bunge Limited (NYSE:BG).

How are hedge funds trading Bunge Limited (NYSE:BG)?

At Q1’s end, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the fourth quarter of 2019. By comparison, 35 hedge funds held shares or bullish call options in BG a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Is BG A Good Stock To Buy?

Among these funds, Adage Capital Management held the most valuable stake in Bunge Limited (NYSE:BG), which was worth $102.3 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $71.5 million worth of shares. Moore Global Investments, D E Shaw, and Candlestick Capital 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 Bunge Limited (NYSE:BG), around 4.89% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, earmarking 3.28 percent of its 13F equity portfolio to BG.

Consequently, key money managers were breaking ground themselves. Candlestick Capital Management, managed by Jack Woodruff, established the most valuable position in Bunge Limited (NYSE:BG). Candlestick Capital Management had $29.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $17.2 million position during the quarter. The other funds with brand new BG positions are Alexander Mitchell’s Scopus Asset Management, Mark Broach’s Manatuck Hill Partners, and David Rosen’s Rubric Capital Management.

Let’s go over hedge fund activity in other stocks similar to Bunge Limited (NYSE:BG). These stocks are Avalara, Inc. (NYSE:AVLR), MGM Resorts International (NYSE:MGM), Post Holdings Inc (NYSE:POST), and HubSpot Inc (NYSE:HUBS). All of these stocks’ market caps are closest to BG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AVLR 34 970359 -13
MGM 50 943490 0
POST 31 1195411 -7
HUBS 27 662117 -3
Average 35.5 942844 -5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $943 million. That figure was $543 million in BG’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand HubSpot Inc (NYSE:HUBS) is the least popular one with only 27 bullish hedge fund positions. Bunge Limited (NYSE:BG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 but beat the market by 15.5 percentage points. Unfortunately BG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BG were disappointed as the stock returned 1.7% during the same time period 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 many of these stocks already outperformed the market so far this year.

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