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Hedge Funds Aren’t Done Buying Brookfield Asset Management Inc. (BAM)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Brookfield Asset Management Inc. (NYSE:BAM) based on those filings.

Brookfield Asset Management Inc. (NYSE:BAM) investors should be aware of an increase in hedge fund interest lately. BAM was in 37 hedge funds’ portfolios at the end of March. There were 34 hedge funds in our database with BAM positions at the end of the previous quarter. Our calculations also showed that BAM 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Martin Whitman Third Avenue Management Marty Whitman

Martin Whitman of Third Avenue Management

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. Now let’s view the key hedge fund action surrounding Brookfield Asset Management Inc. (NYSE:BAM).

What have hedge funds been doing with Brookfield Asset Management Inc. (NYSE:BAM)?

At Q1’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BAM over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Akre Capital Management, managed by Charles Akre, holds the number one position in Brookfield Asset Management Inc. (NYSE:BAM). Akre Capital Management has a $318.3 million position in the stock, comprising 3.1% of its 13F portfolio. On Akre Capital Management’s heels is Tom Gayner of Markel Gayner Asset Management, with a $256.7 million position; 4.8% of its 13F portfolio is allocated to the company. Other peers with similar optimism consist of Ken Griffin’s Citadel Investment Group, Murray Stahl’s Horizon Asset Management and Martin Whitman’s Third Avenue Management. In terms of the portfolio weights assigned to each position Greenlea Lane Capital allocated the biggest weight to Brookfield Asset Management Inc. (NYSE:BAM), around 17.04% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, designating 7.04 percent of its 13F equity portfolio to BAM.

Now, key hedge funds have been driving this bullishness. Locust Wood Capital Advisers, managed by Stephen J. Errico, initiated the most outsized position in Brookfield Asset Management Inc. (NYSE:BAM). Locust Wood Capital Advisers had $16.3 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $7.1 million position during the quarter. The other funds with new positions in the stock are Seth Fischer’s Oasis Management, David Rodriguez-Fraile’s BlueMar Capital Management, and Anand Parekh’s Alyeska Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to Brookfield Asset Management Inc. (NYSE:BAM). These stocks are CNOOC Limited (NYSE:CEO), Activision Blizzard, Inc. (NASDAQ:ATVI), Boston Scientific Corporation (NYSE:BSX), and Illinois Tool Works Inc. (NYSE:ITW). This group of stocks’ market valuations are closest to BAM’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CEO 11 178140 -3
ATVI 101 3053805 25
BSX 59 3081420 5
ITW 34 296563 2
Average 51.25 1652482 7.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 51.25 hedge funds with bullish positions and the average amount invested in these stocks was $1652 million. That figure was $886 million in BAM’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 11 bullish hedge fund positions. Brookfield Asset Management Inc. (NYSE:BAM) is not the least popular stock in this group but hedge fund interest is still below average. 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately BAM wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BAM investors were disappointed as the stock returned 6.7% during the second 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.