Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Barnes Group Inc. (NYSE:B) .
Barnes Group Inc. (NYSE:B) has experienced an increase in activity from the world’s largest hedge funds in recent months. Barnes Group was in 17 hedge funds’ portfolios at the end of the third quarter of 2016. There were 16 hedge funds in our database with Barnes Group positions at the end of the previous quarter. At the end of this article we will also compare B to other stocks including Alexander & Baldwin Inc (NYSE:ALEX), Healthequity Inc (NASDAQ:HQY), and Applied Industrial Technologies (NYSE:AIT) to get a better sense of its popularity.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.
Now, we’re going to review the new action regarding Barnes Group Inc. (NYSE:B).
What have hedge funds been doing with Barnes Group Inc. (NYSE:B)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 6% from the second quarter of 2016. On the other hand, there were a total of 10 hedge funds with a bullish position in Barnes Group at the beginning of this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Israel Englander’s Millennium Management holds the biggest position in Barnes Group Inc. (NYSE:B). According to regulatory filings, the fund has a $9.1 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second most bullish fund manager is David E. Shaw’s D E Shaw, which holds a $6.4 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish contain Martin Whitman’s Third Avenue Management, Glenn Russell Dubin’s Highbridge Capital Management and Joel Greenblatt’s Gotham Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As industrywide interest jumped, specific money managers have been driving this bullishness. Pine River Capital Management, led by Brian Taylor, assembled the most outsized position in Barnes Group Inc. (NYSE:B). According to its latest 13F filing, the fund had $0.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.5 million position during the quarter. The following funds were also among the new Barnes Group investors: Mike Vranos’s Ellington, Matthew Hulsizer’s PEAK6 Capital Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Barnes Group Inc. (NYSE:B) but similarly valued. These stocks are Alexander & Baldwin Inc (NYSE:ALEX), Healthequity Inc (NASDAQ:HQY), Applied Industrial Technologies (NYSE:AIT), and Kennametal Inc. (NYSE:KMT). This group of stocks’ market values match B’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $210 million. That figure was $34 million in B’s case. Kennametal Inc. (NYSE:KMT) is the most popular stock in this table. On the other hand Alexander & Baldwin Inc (NYSE:ALEX) is the least popular one with only 9 bullish hedge fund positions. Barnes Group Inc. (NYSE:B) 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. In this regard KMT might be a better candidate to consider taking a long position in.