Hedge Funds Aren’t Crazy About Broadridge Financial Solutions, Inc. (BR)

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. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Broadridge Financial Solutions, Inc. (NYSE:BR).

Broadridge Financial Solutions, Inc. (NYSE:BR) has seen a decrease in hedge fund interest of late. Broadridge Financial Solutions, Inc. (NYSE:BR) was in 22 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that BR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Phill Gross Adage Capital Phillip Gross

Phillip Gross of Adage Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a glance at the new hedge fund action surrounding Broadridge Financial Solutions, Inc. (NYSE:BR).

Do Hedge Funds Think BR Is A Good Stock To Buy Now?

At the end of March, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BR over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

More specifically, Bristol Gate Capital Partners was the largest shareholder of Broadridge Financial Solutions, Inc. (NYSE:BR), with a stake worth $70.3 million reported as of the end of March. Trailing Bristol Gate Capital Partners was Citadel Investment Group, which amassed a stake valued at $43.4 million. Diamond Hill Capital, Adage Capital Management, and AQR Capital Management 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 Bristol Gate Capital Partners allocated the biggest weight to Broadridge Financial Solutions, Inc. (NYSE:BR), around 4.2% of its 13F portfolio. 1623 Capital is also relatively very bullish on the stock, designating 2.94 percent of its 13F equity portfolio to BR.

Seeing as Broadridge Financial Solutions, Inc. (NYSE:BR) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of hedge funds that elected to cut their positions entirely heading into Q2. It’s worth mentioning that Vikas Lunia’s Lunia Capital cut the biggest position of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $10 million in stock. Renaissance Technologies, also cut its stock, about $5.8 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q2.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Broadridge Financial Solutions, Inc. (NYSE:BR) but similarly valued. We will take a look at Seagate Technology Holdings plc (NASDAQ:STX), CMS Energy Corporation (NYSE:CMS), Waters Corporation (NYSE:WAT), Essex Property Trust Inc (NYSE:ESS), Warner Music Group Corp. (NASDAQ:WMG), Logitech International SA (NASDAQ:LOGI), and Extra Space Storage, Inc. (NYSE:EXR). This group of stocks’ market caps are similar to BR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STX 27 1970595 -3
CMS 28 955427 4
WAT 34 2331723 4
ESS 30 196855 5
WMG 27 839309 -2
LOGI 15 311298 -6
EXR 28 185472 -1
Average 27 970097 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $970 million. That figure was $233 million in BR’s case. Waters Corporation (NYSE:WAT) is the most popular stock in this table. On the other hand Logitech International SA (NASDAQ:LOGI) is the least popular one with only 15 bullish hedge fund positions. Broadridge Financial Solutions, Inc. (NYSE:BR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BR is 39.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market by 7.7 percentage points. A small number of hedge funds were also right about betting on BR, though not to the same extent, as the stock returned 11.3% since the end of Q1 (through July 16th) and outperformed the market.

Follow Broadridge Financial Solutions Inc. (NYSE:BR)

Suggested Articles:

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