Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards BGC Partners, Inc. (NASDAQ:BGCP).
BGC Partners, Inc. (NASDAQ:BGCP) has experienced a decrease in activity from the world’s largest hedge funds lately. BGC Partners, Inc. (NASDAQ:BGCP) was in 21 hedge funds’ portfolios at the end of March. The all time high for this statistic is 31. Our calculations also showed that BGCP isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a peek at the new hedge fund action surrounding BGC Partners, Inc. (NASDAQ:BGCP).
Do Hedge Funds Think BGCP Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position 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.
Among these funds, Arctis Global held the most valuable stake in BGC Partners, Inc. (NASDAQ:BGCP), which was worth $86.6 million at the end of the fourth quarter. On the second spot was Cardinal Capital which amassed $81.3 million worth of shares. Rubric Capital Management, Alyeska Investment Group, and Soros Fund 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 Arctis Global allocated the biggest weight to BGC Partners, Inc. (NASDAQ:BGCP), around 12.28% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, dishing out 2.94 percent of its 13F equity portfolio to BGCP.
Because BGC Partners, Inc. (NASDAQ:BGCP) has witnessed a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds who sold off their full holdings by the end of the first quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management sold off the largest position of the 750 funds watched by Insider Monkey, worth an estimated $24 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund sold off about $0.5 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the first quarter.
Let’s now review hedge fund activity in other stocks similar to BGC Partners, Inc. (NASDAQ:BGCP). We will take a look at Lakeland Financial Corporation (NASDAQ:LKFN), Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL), Lions Gate Entertainment Corporation (NYSE:LGF-B), Primoris Services Corp (NASDAQ:PRIM), Callon Petroleum Company (NYSE:CPE), BrightView Holdings, Inc. (NYSE:BV), and Pandion Therapeutics Inc. (NASDAQ:PAND). This group of stocks’ market valuations match BGCP’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.3 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $305 million in BGCP’s case. Primoris Services Corp (NASDAQ:PRIM) is the most popular stock in this table. On the other hand Lakeland Financial Corporation (NASDAQ:LKFN) is the least popular one with only 9 bullish hedge fund positions. BGC Partners, Inc. (NASDAQ:BGCP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BGCP is 53.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on BGCP, though not to the same extent, as the stock returned 11.6% since Q1 (through July 16th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.