There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Bemis Company, Inc. (NYSE:BMS).
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 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 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 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.
Let’s analyze the key hedge fund action surrounding Bemis Company, Inc. (NYSE:BMS).
Hedge fund activity in Bemis Company, Inc. (NYSE:BMS)
At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 37% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in BMS over the last 13 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
More specifically, Starboard Value LP was the largest shareholder of Bemis Company, Inc. (NYSE:BMS), with a stake worth $95.9 million reported as of the end of September. Trailing Starboard Value LP was Magnetar Capital, which amassed a stake valued at $51.2 million. Echo Street Capital Management, TIG Advisors, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Magnetar Capital, managed by Alec Litowitz and Ross Laser, initiated the most valuable position in Bemis Company, Inc. (NYSE:BMS). Magnetar Capital had $51.2 million invested in the company at the end of the quarter. Carl Tiedemann and Michael Tiedemann’s TIG Advisors also initiated a $27.1 million position during the quarter. The other funds with brand new BMS positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Daniel Arbess’s Perella Weinberg Partners, and James Dinan’s York Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Bemis Company, Inc. (NYSE:BMS). These stocks are Ryman Hospitality Properties, Inc. (NYSE:RHP), Schneider National, Inc. (NYSE:SNDR), Gramercy Property Trust Inc (NYSE:GPT), and Radian Group Inc (NYSE:RDN). This group of stocks’ market caps are closest to BMS’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 22 hedge funds with bullish positions and the average amount invested in these stocks was $448 million. That figure was $400 million in BMS’s case. Ryman Hospitality Properties, Inc. (NYSE:RHP) is the most popular stock in this table. On the other hand Schneider National, Inc. (NYSE:SNDR) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Bemis Company, Inc. (NYSE:BMS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.