Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 835 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 December 31st. In this article we look at what those investors think of BCE Inc. (NYSE:BCE).
Is BCE Inc. (NYSE:BCE) a splendid stock to buy now? Hedge funds are turning bullish. The number of long hedge fund positions increased by 5 in recent months. Our calculations also showed that BCE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 41 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to take a glance at the key hedge fund action surrounding BCE Inc. (NYSE:BCE).
What have hedge funds been doing with BCE Inc. (NYSE:BCE)?
At the end of the fourth quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in BCE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of BCE Inc. (NYSE:BCE), with a stake worth $104.6 million reported as of the end of September. Trailing Renaissance Technologies was GLG Partners, which amassed a stake valued at $38.4 million. Citadel Investment Group, Two Sigma Advisors, and Bridgewater Associates 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 Signition LP allocated the biggest weight to BCE Inc. (NYSE:BCE), around 4.93% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, setting aside 0.57 percent of its 13F equity portfolio to BCE.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Winton Capital Management, managed by David Harding, initiated the biggest position in BCE Inc. (NYSE:BCE). Winton Capital Management had $3 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also made a $2.6 million investment in the stock during the quarter. The other funds with brand new BCE positions are Donald Sussman’s Paloma Partners, George Zweig, Shane Haas and Ravi Chander’s Signition LP, and Matthew Tewksbury’s Stevens Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BCE Inc. (NYSE:BCE) but similarly valued. These stocks are Ross Stores, Inc. (NASDAQ:ROST), Ferrari N.V. (NYSE:RACE), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), and Barclays PLC (NYSE:BCS). All of these stocks’ market caps match BCE’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1020 million. That figure was $220 million in BCE’s case. Ross Stores, Inc. (NASDAQ:ROST) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 11 bullish hedge fund positions. BCE Inc. (NYSE:BCE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 11.7% in 2020 through March 11th but still beat the market by 3.1 percentage points. A small number of hedge funds were also right about betting on BCE as the stock returned -9% during the same time period and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.