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Hedge Funds Are Coming Back To Berry Global Group Inc (BERY)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Berry Global Group Inc (NYSE:BERY) and determine whether the smart money was really smart about this stock.

Berry Global Group Inc (NYSE:BERY) has experienced an increase in enthusiasm from smart money lately. Berry Global Group Inc (NYSE:BERY) was in 40 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 53. There were 34 hedge funds in our database with BERY holdings at the end of March. Our calculations also showed that BERY isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s review the recent hedge fund action surrounding Berry Global Group Inc (NYSE:BERY).

Hedge fund activity in Berry Global Group Inc (NYSE:BERY)

At the end of June, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the first quarter of 2020. On the other hand, there were a total of 40 hedge funds with a bullish position in BERY 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.

Is BERY A Good Stock To Buy?

The largest stake in Berry Global Group Inc (NYSE:BERY) was held by Canyon Capital Advisors, which reported holding $442.6 million worth of stock at the end of September. It was followed by Eminence Capital with a $411.7 million position. Other investors bullish on the company included Lyrical Asset Management, Citadel Investment Group, and Two Creeks Capital Management. In terms of the portfolio weights assigned to each position SCW Capital Management allocated the biggest weight to Berry Global Group Inc (NYSE:BERY), around 18.76% of its 13F portfolio. Canyon Capital Advisors is also relatively very bullish on the stock, designating 14.8 percent of its 13F equity portfolio to BERY.

As one would reasonably expect, specific money managers have been driving this bullishness. 12th Street Asset Management, managed by Michael O’Keefe, assembled the biggest position in Berry Global Group Inc (NYSE:BERY). 12th Street Asset Management had $29.2 million invested in the company at the end of the quarter. Jeffrey Jacobowitz’s Simcoe Capital Management also made a $16.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Alexander Mitchell’s Scopus Asset Management, Steve Cohen’s Point72 Asset Management, and Zach Schreiber’s Point State Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Berry Global Group Inc (NYSE:BERY) but similarly valued. These stocks are Axon Enterprise, Inc. (NASDAQ:AAXN), Farfetch Limited (NYSE:FTCH), Donaldson Company, Inc. (NYSE:DCI), Sensata Technologies Holding plc (NYSE:ST), Santander Consumer USA Holdings Inc (NYSE:SC), Bunge Limited (NYSE:BG), and Aluminum Corp. of China Limited (NYSE:ACH). This group of stocks’ market values match BERY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAXN 39 609333 13
FTCH 37 837456 15
DCI 27 226099 7
ST 33 1073165 7
SC 20 561451 0
BG 37 620306 -2
ACH 6 3451 4
Average 28.4 561609 6.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $562 million. That figure was $1455 million in BERY’s case. Axon Enterprise, Inc. (NASDAQ:AAXN) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Berry Global Group Inc (NYSE:BERY) is more popular among hedge funds. Our overall hedge fund sentiment score for BERY is 82.6. 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 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 33% in 2020 through the end of August and still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on BERY, though not to the same extent, as the stock returned 16.3% since the end of June and outperformed the market as well.

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