Hedge Funds Aren’t Crazy About BHP Group (BBL) Anymore

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 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of BHP Group (NYSE:BBL).

Is BHP Group (NYSE:BBL) a sound stock to buy now? Hedge funds are getting less bullish. The number of long hedge fund bets were trimmed by 3 recently. Our calculations also showed that BBL 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). BBL was in 21 hedge funds’ portfolios at the end of March. There were 24 hedge funds in our database with BBL positions at the end of the previous quarter.

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.

Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox Advisors

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 trades like this one. 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. With all of this in mind we’re going to take a glance at the new hedge fund action regarding BHP Group (NYSE:BBL).

What does smart money think about BHP Group (NYSE:BBL)?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in BBL over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in BHP Group (NYSE:BBL) was held by Fisher Asset Management, which reported holding $184 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $162.9 million position. Other investors bullish on the company included Sand Grove Capital Partners, Polaris Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Sand Grove Capital Partners allocated the biggest weight to BHP Group (NYSE:BBL), around 15.06% of its 13F portfolio. Athos Capital is also relatively very bullish on the stock, dishing out 5.96 percent of its 13F equity portfolio to BBL.

Due to the fact that BHP Group (NYSE:BBL) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their full holdings in the first quarter. Intriguingly, Sara Nainzadeh’s Centenus Global Management said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, valued at an estimated $30.5 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund cut about $11 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to BHP Group (NYSE:BBL). We will take a look at Fidelity National Information Services Inc. (NYSE:FIS), Diageo plc (NYSE:DEO), Sony Corporation (NYSE:SNE), and T-Mobile US, Inc. (NASDAQ:TMUS). This group of stocks’ market caps are similar to BBL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FIS 105 8378290 0
DEO 17 621500 0
SNE 28 461322 2
TMUS 65 1645711 4
Average 53.75 2776706 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 53.75 hedge funds with bullish positions and the average amount invested in these stocks was $2777 million. That figure was $803 million in BBL’s case. Fidelity National Information Services Inc. (NYSE:FIS) is the most popular stock in this table. On the other hand Diageo plc (NYSE:DEO) is the least popular one with only 17 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 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 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on BBL as the stock returned 35.5% during 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.