How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding BCE Inc. (NYSE:BCE).
Is BCE a good stock to buy now? Hedge fund interest in BCE Inc. (NYSE:BCE) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BCE 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). At the end of this article we will also compare BCE to other stocks including Prudential Public Limited Company (NYSE:PUK), Banco Santander (Brasil) SA (NYSE:BSBR), and L3Harris Technologies, Inc. (NASDAQ:LHX) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are several gauges investors have at their disposal to assess publicly traded companies. A couple of the less utilized gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best investment managers can trounce the market by a solid amount (see the details here).
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 take a gander at the fresh hedge fund action encompassing BCE Inc. (NYSE:BCE).
Do Hedge Funds Think BCE Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BCE over the last 21 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of BCE Inc. (NYSE:BCE), with a stake worth $70.6 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $7.3 million. GLG Partners, Citadel Investment Group, and Marshall Wace LLP 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 Renaissance Technologies allocated the biggest weight to BCE Inc. (NYSE:BCE), around 0.07% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to BCE.
Due to the fact that BCE Inc. (NYSE:BCE) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there exists a select few fund managers that elected to cut their full holdings by the end of the third quarter. It’s worth mentioning that D. E. Shaw’s D E Shaw dropped the largest investment of all the hedgies watched by Insider Monkey, worth about $28.2 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dropped its stock, about $22.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as BCE Inc. (NYSE:BCE) but similarly valued. We will take a look at Prudential Public Limited Company (NYSE:PUK), Banco Santander (Brasil) SA (NYSE:BSBR), L3Harris Technologies, Inc. (NASDAQ:LHX), The Kraft Heinz Company (NASDAQ:KHC), Constellation Brands, Inc. (NYSE:STZ), eBay Inc (NASDAQ:EBAY), and Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC). This group of stocks’ market caps are similar to BCE’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 30.9 hedge funds with bullish positions and the average amount invested in these stocks was $2667 million. That figure was $85 million in BCE’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 4 bullish hedge fund positions. BCE Inc. (NYSE:BCE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BCE is 26.9. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 16.2 percentage points. Unfortunately BCE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BCE investors were disappointed as the stock returned 8.8% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.