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Hedge Funds Have Never Been This Bullish On BHP Group (BHP)

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards BHP Group (NYSE:BHP).

BHP Group (NYSE:BHP) was in 21 hedge funds’ portfolios at the end of the third quarter of 2019. BHP investors should pay attention to an increase in enthusiasm from smart money of late. There were 19 hedge funds in our database with BHP positions at the end of the previous quarter. Our calculations also showed that BHP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the new hedge fund action encompassing BHP Group (NYSE:BHP).

What have hedge funds been doing with BHP Group (NYSE:BHP)?

Heading into the fourth quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in BHP over the last 17 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, Fisher Asset Management held the most valuable stake in BHP Group (NYSE:BHP), which was worth $362.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $320.3 million worth of shares. Segantii Capital, Two Sigma Advisors, and D E Shaw 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 Segantii Capital allocated the biggest weight to BHP Group (NYSE:BHP), around 5% of its 13F portfolio. Sensato Capital Management is also relatively very bullish on the stock, dishing out 2.04 percent of its 13F equity portfolio to BHP.

As industrywide interest jumped, some big names were leading the bulls’ herd. Springbok Capital, managed by Gavin Saitowitz and Cisco J. del Valle, assembled the largest position in BHP Group (NYSE:BHP). Springbok Capital had $1.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $1.2 million investment in the stock during the quarter. The only other fund with a new position in the stock is Claes Fornell’s CSat Investment Advisory.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as BHP Group (NYSE:BHP) but similarly valued. We will take a look at Accenture Plc (NYSE:ACN), Novo Nordisk A/S (NYSE:NVO), Paypal Holdings Inc (NASDAQ:PYPL), and Honeywell International Inc. (NYSE:HON). This group of stocks’ market valuations resemble BHP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACN 42 1120846 4
NVO 21 3007327 4
PYPL 95 4135931 0
HON 53 1926350 -3
Average 52.75 2547614 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.75 hedge funds with bullish positions and the average amount invested in these stocks was $2548 million. That figure was $800 million in BHP’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks BHP Group (NYSE:BHP) is even less popular than NVO. Hedge funds dodged a bullet by taking a bearish stance towards BHP. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BHP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BHP investors were disappointed as the stock returned 4.4% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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

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