The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Barings BDC, Inc. (NYSE:BBDC).
Is BBDC a good stock to buy now? Money managers were turning bullish. The number of long hedge fund bets improved by 1 lately. Barings BDC, Inc. (NYSE:BBDC) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 13. Our calculations also showed that BBDC isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind let’s check out the recent hedge fund action encompassing Barings BDC, Inc. (NYSE:BBDC).
Do Hedge Funds Think BBDC Is A Good Stock To Buy Now?
At third quarter’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in BBDC 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, Charles Clough’s Clough Capital Partners has the largest position in Barings BDC, Inc. (NYSE:BBDC), worth close to $12 million, corresponding to 0.9% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $2.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other peers that are bullish contain McKinley Capital Management, Phillip Goldstein, Andrew Dakos and Steven Samuels’s Bulldog Investors and James Morrow’s Callodine Capital Management. In terms of the portfolio weights assigned to each position Clough Capital Partners allocated the biggest weight to Barings BDC, Inc. (NYSE:BBDC), around 0.86% of its 13F portfolio. Callodine Capital Management is also relatively very bullish on the stock, setting aside 0.63 percent of its 13F equity portfolio to BBDC.
As industrywide interest jumped, key money managers have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, assembled the most valuable position in Barings BDC, Inc. (NYSE:BBDC). Tudor Investment Corp had $0.1 million invested in the company at the end of the quarter.
Let’s also examine hedge fund activity in other stocks similar to Barings BDC, Inc. (NYSE:BBDC). These stocks are Central Pacific Financial Corp. (NYSE:CPF), CHP Merger Corp. (NASDAQ:CHPM), Pzena Investment Management Inc (NYSE:PZN), Co-Diagnostics, Inc. (NASDAQ:CODX), Peoples Bancorp Inc. (NASDAQ:PEBO), Heidrick & Struggles International, Inc. (NASDAQ:HSII), and Donegal Group, Inc. (NASDAQ:DGICB). All of these stocks’ market caps are closest to BBDC’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 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $21 million in BBDC’s case. CHP Merger Corp. (NASDAQ:CHPM) is the most popular stock in this table. On the other hand Donegal Group, Inc. (NASDAQ:DGICB) is the least popular one with only 1 bullish hedge fund positions. Barings BDC, Inc. (NYSE:BBDC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BBDC is 53.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on BBDC as the stock returned 17.3% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.