At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Brunswick Corporation (NYSE:BC).
Is BC a good stock to buy? Brunswick Corporation (NYSE:BC) has experienced a decrease in hedge fund interest recently. Brunswick Corporation (NYSE:BC) was in 34 hedge funds’ portfolios at the end of September. The all time high for this statistic is 36. There were 35 hedge funds in our database with BC holdings at the end of June. Our calculations also showed that BC 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 leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now let’s take a look at the key hedge fund action regarding Brunswick Corporation (NYSE:BC).
Do Hedge Funds Think BC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the second quarter of 2020. By comparison, 29 hedge funds held shares or bullish call options in BC a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in Brunswick Corporation (NYSE:BC) was held by Cantillon Capital Management, which reported holding $241.8 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $108.5 million position. Other investors bullish on the company included Kensico Capital, Lakewood Capital Management, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position Levin Capital Strategies allocated the biggest weight to Brunswick Corporation (NYSE:BC), around 3.45% of its 13F portfolio. Lakewood Capital Management is also relatively very bullish on the stock, earmarking 2.92 percent of its 13F equity portfolio to BC.
Due to the fact that Brunswick Corporation (NYSE:BC) has experienced a decline in interest from hedge fund managers, we can see that there was a specific group of hedgies who sold off their full holdings heading into Q4. It’s worth mentioning that Ken Heebner’s Capital Growth Management said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, valued at an estimated $20.5 million in stock. Principal Global Investors’s fund, Columbus Circle Investors, also said goodbye to its stock, about $13.2 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to Brunswick Corporation (NYSE:BC). We will take a look at Owl Rock Capital Corporation (NYSE:ORCC), East West Bancorp, Inc. (NASDAQ:EWBC), BRP Inc. (NASDAQ:DOOO), AutoNation, Inc. (NYSE:AN), Tempur Sealy International Inc. (NYSE:TPX), Performance Food Group Company (NYSE:PFGC), and BridgeBio Pharma, Inc. (NASDAQ:BBIO). All of these stocks’ market caps resemble BC’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 24 hedge funds with bullish positions and the average amount invested in these stocks was $549 million. That figure was $735 million in BC’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 12 bullish hedge fund positions. Brunswick Corporation (NYSE:BC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BC is 64.7. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on BC as the stock returned 38.7% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.