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Hedge Funds Are Buying Braskem SA (BAK)

In this article we will take a look at whether hedge funds think Braskem SA (NYSE:BAK) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Braskem SA (NYSE:BAK) has experienced an increase in enthusiasm from smart money recently. BAK was in 6 hedge funds’ portfolios at the end of March. There were 5 hedge funds in our database with BAK holdings at the end of the previous quarter. Our calculations also showed that BAK 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 tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Howard Marks OAKTREE CAPITAL MANAGEMENT

Howard Marks of Oaktree Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the key hedge fund action encompassing Braskem SA (NYSE:BAK).

What does smart money think about Braskem SA (NYSE:BAK)?

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the fourth quarter of 2019. By comparison, 0 hedge funds held shares or bullish call options in BAK a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

The largest stake in Braskem SA (NYSE:BAK) was held by Contrarian Capital, which reported holding $20.8 million worth of stock at the end of September. It was followed by Oaktree Capital Management with a $1.9 million position. Other investors bullish on the company included Marshall Wace LLP, Citadel Investment Group, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Contrarian Capital allocated the biggest weight to Braskem SA (NYSE:BAK), around 10.91% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to BAK.

As aggregate interest increased, key hedge funds were leading the bulls’ herd. Oaktree Capital Management, managed by Howard Marks, created the biggest position in Braskem SA (NYSE:BAK). Oaktree Capital Management had $1.9 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $0.3 million investment in the stock during the quarter.

Let’s now review hedge fund activity in other stocks similar to Braskem SA (NYSE:BAK). These stocks are NuVasive, Inc. (NASDAQ:NUVA), VEON Ltd. (NASDAQ:VEON), ANGI Homeservices Inc (NASDAQ:ANGI), and Marathon Oil Corporation (NYSE:MRO). This group of stocks’ market values resemble BAK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NUVA 24 206412 -2
VEON 8 18862 -3
ANGI 27 231718 4
MRO 24 93423 -6
Average 20.75 137604 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $138 million. That figure was $24 million in BAK’s case. ANGI Homeservices Inc (NASDAQ:ANGI) is the most popular stock in this table. On the other hand VEON Ltd. (NASDAQ:VEON) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Braskem SA (NYSE:BAK) is even less popular than VEON. Hedge funds clearly dropped the ball on BAK as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on BAK as the stock returned 63.9% so far in the second quarter and outperformed the market by an even larger margin.

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