The market has been volatile due to elections and the potential of another Federal Reserve rate increase. Small cap stocks have been on a tear, as the Russell 2000 ETF (IWM) has outperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of June. SEC filings and hedge fund investor letters indicate that the smart money seems to be getting back in stocks, and the funds’ movements is one of the reasons why small-cap stocks are red hot. In this article, we analyze what the smart money thinks of Baker Hughes Incorporated (NYSE:BHI) and find out how it is affected by hedge funds’ moves.
Is Baker Hughes worth your attention right now? It looks like prominent investors are taking a bearish view. The number of long hedge fund bets went down by two during the third quarter and 42 investors from our database held long positions in the company at the end of September. At the end of this article we will also compare BHI to other stocks including Energy Transfer Partners LP (NYSE:ETP), Ecopetrol S.A. (ADR) (NYSE:EC), and Sirius XM Holdings Inc (NASDAQ:SIRI) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Now, we’re going to take a gander at the recent action surrounding Baker Hughes Incorporated (NYSE:BHI).
What have hedge funds been doing with Baker Hughes Incorporated (NYSE:BHI)?
A total of 42 funds tracked by Insider Monkey held long positions in Baker Hughes Incorporated, down by 5% from the second quarter of 2016. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, ValueAct Capital, managed by Jeffrey Ubben, holds the number one position in Baker Hughes Incorporated (NYSE:BHI). ValueAct Capital has a $1.5084 billion position in the stock, comprising 13.1% of its 13F portfolio. The second most bullish fund manager is Ken Griffin’s Citadel Investment Group, which holds a $195 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Israel Englander’s Millennium Management, William B. Gray’s Orbis Investment Management, and John Overdeck and David Siegel’s Two Sigma Advisors.
Seeing as Baker Hughes Incorporated (NYSE:BHI) has faced falling interest from the smart money, logic holds that there is a sect of fund managers who sold off their full holdings between July and September. Intriguingly, Rob Citrone’s Discovery Capital Management cut the largest investment of all the hedgies followed by Insider Monkey, comprising about $55.5 million in stock, and Till Bechtolsheimer’s Arosa Capital Management was right behind this move, as the fund dumped about $50 million worth of shares.
Let’s now review hedge fund activity in other stocks similar to Baker Hughes Incorporated (NYSE:BHI). These stocks are Energy Transfer Partners LP (NYSE:ETP), Ecopetrol S.A. (ADR) (NYSE:EC), Sirius XM Holdings Inc (NASDAQ:SIRI), and The Progressive Corporation (NYSE:PGR). This group of stocks’ market valuations are similar to BHI’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 22 investors with bullish positions and the average amount invested in these stocks was $706 million at the end of September. By comparison, the 42 funds bullish on BHI amassed $2.64 billion worth of its shares. The Progressive Corporation (NYSE:PGR) is the most popular stock in this table, while Ecopetrol S.A. (ADR) (NYSE:EC) is the least popular one with only eight bullish hedge fund positions. Compared to these stocks, Baker Hughes Incorporated (NYSE:BHI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.