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 BorgWarner Inc. (NYSE:BWA) based on those filings.
BorgWarner Inc. (NYSE:BWA) was in 30 hedge funds’ portfolios at the end of March. BWA has seen an increase in hedge fund sentiment in recent months. There were 27 hedge funds in our database with BWA positions at the end of the previous quarter. Our calculations also showed that BWA 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
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 new hedge fund action surrounding BorgWarner Inc. (NYSE:BWA).
Hedge fund activity in BorgWarner Inc. (NYSE:BWA)
Heading into the second quarter of 2020, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2019. By comparison, 21 hedge funds held shares or bullish call options in BWA a year ago. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the biggest position in BorgWarner Inc. (NYSE:BWA), worth close to $294.5 million, corresponding to 2% of its total 13F portfolio. The second most bullish fund manager is Ariel Investments, managed by John W. Rogers, which holds a $52.8 million position; the fund has 0.9% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish include Cliff Asness’s AQR Capital Management, Mario Gabelli’s GAMCO Investors and Carl Tiedemann and Michael Tiedemann’s TIG Advisors. In terms of the portfolio weights assigned to each position Weiss Asset Management allocated the biggest weight to BorgWarner Inc. (NYSE:BWA), around 2.12% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, designating 2.02 percent of its 13F equity portfolio to BWA.
Now, specific money managers were breaking ground themselves. TIG Advisors, managed by Carl Tiedemann and Michael Tiedemann, assembled the most valuable position in BorgWarner Inc. (NYSE:BWA). TIG Advisors had $14.2 million invested in the company at the end of the quarter. Andrew Weiss’s Weiss Asset Management also made a $13.3 million investment in the stock during the quarter. The other funds with brand new BWA positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Andrew Kurita’s Kettle Hill Capital Management, and Israel Englander’s Millennium Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BorgWarner Inc. (NYSE:BWA) but similarly valued. We will take a look at Canopy Growth Corporation (NYSE:CGC), Wayfair Inc (NYSE:W), Repligen Corporation (NASDAQ:RGEN), and Haemonetics Corporation (NYSE:HAE). This group of stocks’ market caps are similar to BWA’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 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $526 million. That figure was $482 million in BWA’s case. Wayfair Inc (NYSE:W) is the most popular stock in this table. On the other hand Canopy Growth Corporation (NYSE:CGC) is the least popular one with only 10 bullish hedge fund positions. BorgWarner Inc. (NYSE:BWA) is not the most popular stock in this group but hedge fund interest is still above average. 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 but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on BWA as the stock returned 32.6% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.