Hedge Funds Have Never Been This Bullish On BrightSphere Investment Group Inc (BSIG)

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards BrightSphere Investment Group Inc (NYSE:BSIG).

Is BrightSphere Investment Group Inc (NYSE:BSIG) a healthy stock for your portfolio? The best stock pickers were taking a bullish view. The number of long hedge fund bets went up by 3 recently. BrightSphere Investment Group Inc (NYSE:BSIG) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BSIG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 26 hedge funds in our database with BSIG holdings at the end of March.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s view the key hedge fund action encompassing BrightSphere Investment Group Inc (NYSE:BSIG).

Do Hedge Funds Think BSIG Is A Good Stock To Buy Now?

At second quarter’s end, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BSIG over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Paulson & Co held the most valuable stake in BrightSphere Investment Group Inc (NYSE:BSIG), which was worth $468.6 million at the end of the second quarter. On the second spot was Azora Capital which amassed $55.8 million worth of shares. Schonfeld Strategic Advisors, Royce & Associates, and Point72 Asset Management 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 Paulson & Co allocated the biggest weight to BrightSphere Investment Group Inc (NYSE:BSIG), around 11.2% of its 13F portfolio. Toscafund Asset Management is also relatively very bullish on the stock, designating 10.36 percent of its 13F equity portfolio to BSIG.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Jet Capital Investors, managed by Matthew Mark, assembled the most outsized position in BrightSphere Investment Group Inc (NYSE:BSIG). Jet Capital Investors had $15.3 million invested in the company at the end of the quarter. Ian Simm’s Impax Asset Management also made a $3.4 million investment in the stock during the quarter. The other funds with brand new BSIG positions are Renaissance Technologies, Jay Petschek and Steven Major’s Corsair Capital Management, and Ken Griffin’s Citadel Investment Group.

Let’s now review hedge fund activity in other stocks similar to BrightSphere Investment Group Inc (NYSE:BSIG). We will take a look at CSW Industrials, Inc. (NASDAQ:CSWI), Triumph Bancorp Inc (NASDAQ:TBK), Enerplus Corp (NYSE:ERF), View, Inc. (NASDAQ:VIEW), YPF Sociedad Anonima (NYSE:YPF), Monmouth Real Estate Investment Corp. (NYSE:MNR), and PBF Energy Inc (NYSE:PBF). This group of stocks’ market caps are closest to BSIG’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $776 million in BSIG’s case. Triumph Bancorp Inc (NASDAQ:TBK) is the most popular stock in this table. On the other hand YPF Sociedad Anonima (NYSE:YPF) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks BrightSphere Investment Group Inc (NYSE:BSIG) is more popular among hedge funds. Our overall hedge fund sentiment score for BSIG is 88. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 24.9% in 2021 through October 15th but still managed to beat the market by 4.5 percentage points. Hedge funds were also right about betting on BSIG as the stock returned 14.3% since the end of June (through 10/15) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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