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Did Hedge Funds Make The Right Call On BWX Technologies Inc (BWXT) ?

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 BWX Technologies Inc (NYSE:BWXT) at the end of the first quarter and determine whether the smart money was really smart about this stock.

BWX Technologies Inc (NYSE:BWXT) was in 24 hedge funds’ portfolios at the end of the first quarter of 2020. BWXT shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 22 hedge funds in our database with BWXT holdings at the end of the previous quarter. 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.

In the 21st century investor’s toolkit there are plenty of tools stock market investors can use to analyze their stock investments. Some of the less known tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outclass the market by a superb margin (see the details here).

BRIDGEWATER ASSOCIATES

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. 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 if you have any good ideas send us an email. Keeping this in mind let’s check out the recent hedge fund action surrounding BWX Technologies Inc (NYSE:BWXT).

What have hedge funds been doing with BWX Technologies Inc (NYSE:BWXT)?

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on 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 hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is BWXT A Good Stock To Buy?

The largest stake in BWX Technologies Inc (NYSE:BWXT) was held by Cardinal Capital, which reported holding $40.4 million worth of stock at the end of September. It was followed by Marshall Wace LLP with a $10.7 million position. Other investors bullish on the company included Balyasny Asset Management, Citadel Investment Group, and Mountaineer Partners Management. 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, designating 1.99 percent of its 13F equity portfolio to BWXT.

Now, key hedge funds were leading the bulls’ herd. Cardinal Capital, managed by Amy Minella, assembled the most outsized 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 made a $4.9 million investment in the stock during the quarter. The other funds with brand new BWXT positions are 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 values match BWXT’s market value.

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 dodged a bullet by taking a bearish stance towards BWXT. Our calculations showed that the top 10 most popular hedge fund stocks 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 managed to beat the market by 15.5 percentage points. Unfortunately BWXT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); BWXT investors were disappointed as the stock returned 16.7% 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 so far in 2020.

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