Hedge Funds Dropped The Ball On British American Tobacco plc (BTI)

Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.

British American Tobacco plc (NYSEAMEX:BTI) shareholders have witnessed a decrease in hedge fund interest recently. Our calculations also showed that BTI isn’t among the 30 most popular stocks among hedge funds.

If you’d ask most market participants, hedge funds are viewed as unimportant, outdated financial vehicles of the past. While there are greater than 8000 funds in operation at the moment, Our researchers look at the masters of this group, approximately 750 funds. It is estimated that this group of investors handle bulk of all hedge funds’ total asset base, and by shadowing their first-class equity investments, Insider Monkey has figured out various investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by nearly 5 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.


Let’s take a gander at the latest hedge fund action surrounding British American Tobacco plc (NYSEAMEX:BTI).

What does the smart money think about British American Tobacco plc (NYSEAMEX:BTI)?

Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in BTI over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


Among these funds, Maverick Capital held the most valuable stake in British American Tobacco plc (NYSEAMEX:BTI), which was worth $68.9 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $43.5 million worth of shares. Moreover, Arrowstreet Capital, D E Shaw, and Marshall Wace LLP were also bullish on British American Tobacco plc (NYSEAMEX:BTI), allocating a large percentage of their portfolios to this stock.

Seeing as British American Tobacco plc (NYSEAMEX:BTI) has experienced a decline in interest from hedge fund managers, it’s safe to say that there is a sect of hedge funds that slashed their full holdings heading into Q3. Intriguingly, Israel Englander’s Millennium Management dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, comprising about $9.7 million in stock. David Winters’s fund, Wintergreen Advisers, also dropped its stock, about $5.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds heading into Q3.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as British American Tobacco plc (NYSEAMEX:BTI) but similarly valued. These stocks are Banco Santander, S.A. (NYSE:SAN), CIGNA Corporation (NYSE:CI), Danaher Corporation (NYSE:DHR), and ConocoPhillips (NYSE:COP). This group of stocks’ market caps are closest to BTI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAN 18 698131 -1
CI 68 4557359 8
DHR 48 2127751 -3
COP 59 1984993 4
Average 48.25 2342059 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.25 hedge funds with bullish positions and the average amount invested in these stocks was $2342 million. That figure was $192 million in BTI’s case. CIGNA Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Banco Santander, S.A. (NYSE:SAN) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks British American Tobacco plc (NYSEAMEX:BTI) is even less popular than SAN. It seems like hedge funds dropped the ball on BTI as several hedge funds sold out of the stock in recent years. However, they were right on other large-cap stocks. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. A few hedge funds were also right about betting on BTI as the stock returned 28.2% and outperformed the market as well.

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