While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Berry Global Group Inc (NYSE:BERY).
Is BERY a good stock to buy now? Investors who are in the know were getting more bullish. The number of long hedge fund bets advanced by 3 lately. Berry Global Group Inc (NYSE:BERY) was in 43 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 53. Our calculations also showed that BERY 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. With all of this in mind we’re going to take a look at the latest hedge fund action regarding Berry Global Group Inc (NYSE:BERY).
Do Hedge Funds Think BERY Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BERY over the last 21 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Canyon Capital Advisors, managed by Joshua Friedman and Mitchell Julis, holds the number one position in Berry Global Group Inc (NYSE:BERY). Canyon Capital Advisors has a $341.7 million position in the stock, comprising 12.7% of its 13F portfolio. Sitting at the No. 2 spot is Eminence Capital, led by Ricky Sandler, holding a $327.9 million position; 3.2% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism include Andrew Wellington and Jeff Keswin’s Lyrical Asset Management, Ryan Pedlow’s Two Creeks Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position SCW Capital Management allocated the biggest weight to Berry Global Group Inc (NYSE:BERY), around 15.93% of its 13F portfolio. Canyon Capital Advisors is also relatively very bullish on the stock, designating 12.69 percent of its 13F equity portfolio to BERY.
As aggregate interest increased, key money managers were leading the bulls’ herd. Renaissance Technologies, assembled the biggest position in Berry Global Group Inc (NYSE:BERY). Renaissance Technologies had $27.3 million invested in the company at the end of the quarter. Steven Tananbaum’s GoldenTree Asset Management also initiated a $23.5 million position during the quarter. The other funds with new positions in the stock are Wayne Cooperman’s Cobalt Capital Management, Noam Gottesman’s GLG Partners, and Ira Unschuld’s Brant Point Investment Management.
Let’s now take a look at hedge fund activity in other stocks similar to Berry Global Group Inc (NYSE:BERY). These stocks are Bunge Limited (NYSE:BG), Autoliv Inc. (NYSE:ALV), The Gap Inc. (NYSE:GPS), SolarWinds Corporation (NYSE:SWI), Gentex Corporation (NASDAQ:GNTX), Gerdau SA (NYSE:GGB), and Commerce Bancshares, Inc. (NASDAQ:CBSH). This group of stocks’ market values match BERY’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 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $782 million. That figure was $1263 million in BERY’s case. Bunge Limited (NYSE:BG) is the most popular stock in this table. On the other hand Gerdau SA (NYSE:GGB) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Berry Global Group Inc (NYSE:BERY) is more popular among hedge funds. Our overall hedge fund sentiment score for BERY is 82.3. 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 32.9% in 2020 through December 8th and still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on BERY, though not to the same extent, as the stock returned 10.7% since the end of September (through December 8th) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.