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Hedge Funds Are Selling BCE Inc. (BCE)

Is BCE Inc. (NYSE:BCE) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

BCE Inc. (NYSE:BCE) was in 13 hedge funds’ portfolios at the end of the third quarter of 2019. BCE shareholders have witnessed a decrease in hedge fund interest recently. There were 14 hedge funds in our database with BCE holdings at the end of the previous quarter. Our calculations also showed that BCE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s view the latest hedge fund action encompassing BCE Inc. (NYSE:BCE).

How are hedge funds trading BCE Inc. (NYSE:BCE)?

Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in BCE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in BCE Inc. (NYSE:BCE) was held by Citadel Investment Group, which reported holding $166.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $130.8 million position. Other investors bullish on the company included GLG Partners, Two Sigma Advisors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to BCE Inc. (NYSE:BCE), around 0.41% of its 13F portfolio. Vertex One Asset Management is also relatively very bullish on the stock, earmarking 0.23 percent of its 13F equity portfolio to BCE.

Seeing as BCE Inc. (NYSE:BCE) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there exists a select few hedgies that elected to cut their full holdings in the third quarter. Intriguingly, Donald Sussman’s Paloma Partners cut the largest investment of the 750 funds watched by Insider Monkey, worth about $1.2 million in stock, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors was right behind this move, as the fund dropped about $0.7 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as BCE Inc. (NYSE:BCE) but similarly valued. We will take a look at Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Tesla Inc. (NASDAQ:TSLA), EOG Resources Inc (NYSE:EOG), and Biogen Inc. (NASDAQ:BIIB). This group of stocks’ market caps are similar to BCE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRTX 46 2296101 6
TSLA 28 570594 -9
EOG 48 1449930 12
BIIB 48 4207480 5
Average 42.5 2131026 3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.5 hedge funds with bullish positions and the average amount invested in these stocks was $2131 million. That figure was $416 million in BCE’s case. EOG Resources Inc (NYSE:EOG) is the most popular stock in this table. On the other hand Tesla Inc. (NASDAQ:TSLA) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks BCE Inc. (NYSE:BCE) is even less popular than TSLA. Hedge funds dodged a bullet by taking a bearish stance towards BCE. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BCE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BCE investors were disappointed as the stock returned -0.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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

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