In this article we are going to use hedge fund sentiment as a tool and determine whether Brookdale Senior Living, Inc. (NYSE:BKD) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is BKD a good stock to buy now? Hedge funds were getting less bullish. The number of bullish hedge fund positions dropped by 4 in recent months. Brookdale Senior Living, Inc. (NYSE:BKD) was in 20 hedge funds’ portfolios at the end of September. The all time high for this statistic is 66. Our calculations also showed that BKD 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). There were 24 hedge funds in our database with BKD holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’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. With all of this in mind we’re going to go over the fresh hedge fund action encompassing Brookdale Senior Living, Inc. (NYSE:BKD).
Do Hedge Funds Think BKD Is A Good Stock To Buy Now?
At third quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BKD over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Deerfield Management was the largest shareholder of Brookdale Senior Living, Inc. (NYSE:BKD), with a stake worth $45 million reported as of the end of September. Trailing Deerfield Management was Camber Capital Management, which amassed a stake valued at $38.1 million. Glenview Capital, Renaissance Technologies, and D E Shaw 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 North Run Capital allocated the biggest weight to Brookdale Senior Living, Inc. (NYSE:BKD), around 2.82% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, setting aside 2.01 percent of its 13F equity portfolio to BKD.
Judging by the fact that Brookdale Senior Living, Inc. (NYSE:BKD) has faced bearish sentiment from the smart money, it’s safe to say that there exists a select few funds that slashed their positions entirely in the third quarter. Intriguingly, Peter Schliemann’s Rutabaga Capital Management dumped the largest investment of the 750 funds watched by Insider Monkey, worth close to $1 million in stock. Lee Ainslie’s fund, Maverick Capital, also sold off its stock, about $0.4 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Brookdale Senior Living, Inc. (NYSE:BKD) but similarly valued. These stocks are Pacific Ethanol Inc (NASDAQ:PEIX), WisdomTree Investments, Inc. (NASDAQ:WETF), Renalytix AI plc (NASDAQ:RNLX), Trevena Inc (NASDAQ:TRVN), Collectors Universe, Inc. (NASDAQ:CLCT), AngioDynamics, Inc. (NASDAQ:ANGO), and Energy Recovery, Inc. (NASDAQ:ERII). This group of stocks’ market valuations match BKD’s market valuation.
|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 11.1 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $181 million in BKD’s case. WisdomTree Investments, Inc. (NASDAQ:WETF) is the most popular stock in this table. On the other hand Renalytix AI plc (NASDAQ:RNLX) is the least popular one with only 4 bullish hedge fund positions. Brookdale Senior Living, Inc. (NYSE:BKD) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BKD is 54.5. 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. 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. Hedge funds were also right about betting on BKD as the stock returned 61.4% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.