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Hedge Funds Are Nibbling On BHP Group (BBL)

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). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 BHP Group (NYSE:BBL) at the end of the second quarter and determine whether the smart money was really smart about this stock.

BHP Group (NYSE:BBL) investors should pay attention to an increase in hedge fund interest lately. BHP Group (NYSE:BBL) was in 22 hedge funds’ portfolios at the end of June. The all time high for this statistics is 24. There were 21 hedge funds in our database with BBL holdings at the end of March. Our calculations also showed that BBL 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.

Today there are dozens of tools investors put to use to appraise their holdings. A duo of the most underrated tools are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can beat their index-focused peers by a solid margin (see the details here).

YORK CAPITAL MANAGEMENT

James Dinan of York Capital Management

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 lithium company which could also benefit from the electric car adoption. 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. 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 website to get excerpts of these letters in your inbox. Now we’re going to take a glance at the recent hedge fund action regarding BHP Group (NYSE:BBL).

What have hedge funds been doing with BHP Group (NYSE:BBL)?

At second quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in BBL over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in BHP Group (NYSE:BBL), which was worth $264 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $213.5 million worth of shares. Millennium Management, York Capital Management, and Sand Grove Capital Partners 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 Sand Grove Capital Partners allocated the biggest weight to BHP Group (NYSE:BBL), around 11.54% of its 13F portfolio. Athos Capital is also relatively very bullish on the stock, designating 6.06 percent of its 13F equity portfolio to BBL.

Now, some big names have jumped into BHP Group (NYSE:BBL) headfirst. Segantii Capital, managed by Simon Sadler, established the most valuable position in BHP Group (NYSE:BBL). Segantii Capital had $5 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also made a $3.2 million investment in the stock during the quarter. The other funds with brand new BBL positions are Noam Gottesman’s GLG Partners, Benjamin A. Smith’s Laurion Capital Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now review hedge fund activity in other stocks similar to BHP Group (NYSE:BBL). These stocks are The Boeing Company (NYSE:BA), PetroChina Company Limited (NYSE:PTR), Pinduoduo Inc. (NASDAQ:PDD), QUALCOMM, Incorporated (NASDAQ:QCOM), Lockheed Martin Corporation (NYSE:LMT), GlaxoSmithKline plc (NYSE:GSK), and Lowe’s Companies, Inc. (NYSE:LOW). This group of stocks’ market values match BBL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BA 39 1280437 -15
PTR 6 63660 -1
PDD 30 4149572 2
QCOM 74 2202796 14
LMT 53 1553657 -2
GSK 28 2068711 1
LOW 89 6589304 18
Average 45.6 2558305 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.6 hedge funds with bullish positions and the average amount invested in these stocks was $2558 million. That figure was $919 million in BBL’s case. Lowe’s Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 6 bullish hedge fund positions. BHP Group (NYSE:BBL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BBL is 43.1. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately BBL wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BBL investors were disappointed as the stock returned 6.2% in the third 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 in 2020.

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