Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Bel Fuse, Inc. (NASDAQ:BELFB).
Is Bel Fuse (BELFB) a good stock to buy now? Investors who are in the know were in a pessimistic mood. The number of long hedge fund bets were trimmed by 1 in recent months. Bel Fuse, Inc. (NASDAQ:BELFB) was in 7 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. Our calculations also showed that BELFB 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.
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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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. Keeping this in mind we’re going to review the recent hedge fund action encompassing Bel Fuse, Inc. (NASDAQ:BELFB).
How have hedgies been trading Bel Fuse, Inc. (NASDAQ:BELFB)?
At the end of September, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in BELFB a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Bel Fuse, Inc. (NASDAQ:BELFB), which was worth $5.3 million at the end of the third quarter. On the second spot was Oaktree Capital Management which amassed $4.9 million worth of shares. Millennium Management, Horizon Asset Management, and Two Sigma Advisors 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 Oaktree Capital Management allocated the biggest weight to Bel Fuse, Inc. (NASDAQ:BELFB), around 0.11% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to BELFB.
Since Bel Fuse, Inc. (NASDAQ:BELFB) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there exists a select few funds that slashed their entire stakes in the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest stake of the 750 funds followed by Insider Monkey, valued at about $0.1 million in stock. Chuck Royce’s fund, Royce & Associates, also sold off its stock, about $0 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds in the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Bel Fuse, Inc. (NASDAQ:BELFB) but similarly valued. These stocks are Radcom Ltd. (NASDAQ:RDCM), Evolus, Inc. (NASDAQ:EOLS), Actinium Pharmaceuticals Inc (NYSE:ATNM), Minerva Neurosciences, Inc (NASDAQ:NERV), Genprex, Inc. (NASDAQ:GNPX), AgEagle Aerial Systems, Inc. (NYSE:UAVS), and Atento SA (NYSE:ATTO). This group of stocks’ market values are similar to BELFB’s market value.
|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 6.4 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $11 million in BELFB’s case. Minerva Neurosciences, Inc (NASDAQ:NERV) is the most popular stock in this table. On the other hand Genprex, Inc. (NASDAQ:GNPX) is the least popular one with only 2 bullish hedge fund positions. Bel Fuse, Inc. (NASDAQ:BELFB) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BELFB is 42.3. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on BELFB as the stock returned 39% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.