Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the first 6 weeks of the fourth quarter we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Belden Inc. (NYSE:BDC) to find out whether it was one of their high conviction long-term ideas.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a gander at the fresh hedge fund action surrounding Belden Inc. (NYSE:BDC).
How are hedge funds trading Belden Inc. (NYSE:BDC)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BDC over the last 13 quarters. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Basswood Capital was the largest shareholder of Belden Inc. (NYSE:BDC), with a stake worth $3.9 million reported as of the end of September. Trailing Basswood Capital was Citadel Investment Group, which amassed a stake valued at $2.2 million. Prescott Group Capital Management, Marshall Wace LLP, and PEAK6 Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Belden Inc. (NYSE:BDC) has faced declining sentiment from hedge fund managers, it’s safe to say that there is a sect of hedge funds that elected to cut their positions entirely in the third quarter. It’s worth mentioning that Alexander Roepers’s Atlantic Investment Management dropped the largest investment of all the hedgies watched by Insider Monkey, valued at about $4.5 million in stock, and Joshua Nash’s Ulysses Management was right behind this move, as the fund dropped about $1.2 million worth. These bearish behaviors 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 Belden Inc. (NYSE:BDC) but similarly valued. These stocks are Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Adtalem Global Education Inc. (NYSE:ATGE), Eventbrite, Inc. (NYSE:EB), and Orbotech Ltd. (NASDAQ:ORBK). This group of stocks’ market values are closest to BDC’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 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $490 million. That figure was $12 million in BDC’s case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Adtalem Global Education Inc. (NYSE:ATGE) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Belden Inc. (NYSE:BDC) is even less popular than ATGE. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.