After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards BHP Group (NYSE:BHP).
Is BHP a good stock to buy now? Money managers were taking an optimistic view. The number of long hedge fund positions advanced by 2 lately. BHP Group (NYSE:BHP) was in 18 hedge funds’ portfolios at the end of September. The all time high for this statistic is 24. Our calculations also showed that BHP 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 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 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.
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. Now let’s check out the new hedge fund action encompassing BHP Group (NYSE:BHP).
Do Hedge Funds Think BHP Is A Good Stock To Buy Now?
At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BHP over the last 21 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in BHP Group (NYSE:BHP), which was worth $396.1 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $191.5 million worth of shares. CQS Cayman LP, D E Shaw, and LMR Partners 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 CQS Cayman LP allocated the biggest weight to BHP Group (NYSE:BHP), around 5.48% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, dishing out 1.8 percent of its 13F equity portfolio to BHP.
As industrywide interest jumped, key money managers have been driving this bullishness. LMR Partners, managed by Ben Levine, Andrew Manuel and Stefan Renold, assembled the largest position in BHP Group (NYSE:BHP). LMR Partners had $18.5 million invested in the company at the end of the quarter. Matthew Moskey and Friedrich Schulte-Hillen’s Athos Capital also made a $1.6 million investment in the stock during the quarter. The following funds were also among the new BHP investors: Donald Sussman’s Paloma Partners, Murray Stahl’s Horizon Asset Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as BHP Group (NYSE:BHP) but similarly valued. These stocks are Charter Communications, Inc. (NASDAQ:CHTR), Sanofi (NYSE:SNY), Lowe’s Companies, Inc. (NYSE:LOW), Linde plc (NYSE:LIN), Shopify Inc (NYSE:SHOP), Royal Dutch Shell plc (NYSE:RDS), and Philip Morris International Inc. (NYSE:PM). All of these stocks’ market caps match BHP’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 59 hedge funds with bullish positions and the average amount invested in these stocks was $4910 million. That figure was $711 million in BHP’s case. Charter Communications, Inc. (NASDAQ:CHTR) is the most popular stock in this table. On the other hand Sanofi (NYSE:SNY) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks BHP Group (NYSE:BHP) is even less popular than SNY. Our overall hedge fund sentiment score for BHP is 29.5. 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. Hedge funds clearly dropped the ball on BHP as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on BHP as the stock returned 22.6% since Q3 (through December 14th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.