Here is What Hedge Funds Really Think About BlackBerry Limited (BB)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards BlackBerry Limited (NYSE:BB) and determine whether hedge funds skillfully traded this stock.

Hedge fund interest in BlackBerry Limited (NYSE:BB) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BB isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare BB to other stocks including FireEye Inc (NASDAQ:FEYE), National Health Investors Inc (NYSE:NHI), and WD-40 Company (NASDAQ:WDFC) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are several gauges shareholders can use to analyze publicly traded companies. A duo of the most under-the-radar gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can beat the broader indices by a superb amount (see the details here).

Prem Watsa of Fairfax Financial Holdings

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a peek at the latest hedge fund action encompassing BlackBerry Limited (NYSE:BB).

What have hedge funds been doing with BlackBerry Limited (NYSE:BB)?

At second quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in BB a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, Fairfax Financial Holdings held the most valuable stake in BlackBerry Limited (NYSE:BB), which was worth $227.5 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $42.4 million worth of shares. Kahn Brothers, D E Shaw, and Citadel Investment Group 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 Fairfax Financial Holdings allocated the biggest weight to BlackBerry Limited (NYSE:BB), around 14.28% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, designating 4.72 percent of its 13F equity portfolio to BB.

Since BlackBerry Limited (NYSE:BB) has witnessed a decline in interest from hedge fund managers, it’s easy to see that there exists a select few fund managers that elected to cut their positions entirely in the second quarter. Intriguingly, David Cohen and Harold Levy’s Iridian Asset Management said goodbye to the largest position of the 750 funds watched by Insider Monkey, worth an estimated $29.6 million in stock. Stephen Mildenhall’s fund, Contrarius Investment Management, also cut its stock, about $4.5 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BlackBerry Limited (NYSE:BB) but similarly valued. These stocks are FireEye Inc (NASDAQ:FEYE), National Health Investors Inc (NYSE:NHI), WD-40 Company (NASDAQ:WDFC), Companhia Siderurgica Nacional (NYSE:SID), Element Solutions Inc. (NYSE:ESI), 21Vianet Group Inc (NASDAQ:VNET), and Equinox Gold Corp. (NYSE:EQX). All of these stocks’ market caps are similar to BB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FEYE 28 256703 -4
NHI 15 94170 2
WDFC 15 187292 -2
SID 7 9332 2
ESI 37 411986 2
VNET 19 266431 4
EQX 14 122841 7
Average 19.3 192679 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.3 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $347 million in BB’s case. Element Solutions Inc. (NYSE:ESI) is the most popular stock in this table. On the other hand Companhia Siderurgica Nacional (NYSE:SID) is the least popular one with only 7 bullish hedge fund positions. BlackBerry Limited (NYSE:BB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BB is 52. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately BB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BB were disappointed as the stock returned -6.1% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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