“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Brookdale Senior Living, Inc. (NYSE:BKD) and see how it was affected.
Brookdale Senior Living, Inc. (NYSE:BKD) was in 26 hedge funds’ portfolios at the end of December. BKD has experienced an increase in activity from the world’s largest hedge funds of late. There were 20 hedge funds in our database with BKD positions at the end of the previous quarter. Our calculations also showed that BKD isn’t among the 30 most popular stocks among hedge funds.
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. 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.
We’re going to take a peek at the recent hedge fund action regarding Brookdale Senior Living, Inc. (NYSE:BKD).
How have hedgies been trading Brookdale Senior Living, Inc. (NYSE:BKD)?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in BKD a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Glenview Capital, managed by Larry Robbins, holds the most valuable position in Brookdale Senior Living, Inc. (NYSE:BKD). Glenview Capital has a $97.4 million position in the stock, comprising 0.9% of its 13F portfolio. Sitting at the No. 2 spot is Camber Capital Management, managed by Stephen DuBois, which holds a $50.3 million position; 2.4% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish consist of Jim Simons’s Renaissance Technologies, John Paulson’s Paulson & Co and James E. Flynn’s Deerfield Management.
Now, some big names have been driving this bullishness. HBK Investments, managed by David Costen Haley, initiated the most valuable position in Brookdale Senior Living, Inc. (NYSE:BKD). HBK Investments had $1 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $0.9 million investment in the stock during the quarter. The other funds with brand new BKD positions are Minhua Zhang’s Weld Capital Management, Noam Gottesman’s GLG Partners, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s go over hedge fund activity in other stocks similar to Brookdale Senior Living, Inc. (NYSE:BKD). We will take a look at Ship Finance International Limited (NYSE:SFL), Papa John’s International, Inc. (NASDAQ:PZZA), Builders FirstSource, Inc. (NASDAQ:BLDR), and Safety Insurance Group, Inc. (NASDAQ:SAFT). This group of stocks’ market valuations resemble BKD’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $361 million in BKD’s case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand Safety Insurance Group, Inc. (NASDAQ:SAFT) is the least popular one with only 11 bullish hedge fund positions. Brookdale Senior Living, Inc. (NYSE:BKD) is not the most popular stock in this group but hedge fund interest is still above average. 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately BKD wasn’t nearly as popular as these 15 stock and hedge funds that were betting on BKD were disappointed as the stock returned -9.3% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.