Is BorgWarner Inc. (BWA) Going to Burn These Hedge Funds?

As aggregate interest increased, some big names were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, created the biggest position in BorgWarner Inc. (NYSE:BWA), worth approximately $14.2 million at the end of September. Ken Gray and Steve Walsh’s Bryn Mawr Capital also made a $3.3 million investment in the stock during the quarter. The following funds were also among the new BWA investors: John Overdeck and David Siegel’s Two Sigma Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors.

Let’s also examine hedge fund activity in other stocks similar to BorgWarner Inc. (NYSE:BWA). These stocks are The Western Union Company (NYSE:WU), Annaly Capital Management, Inc. (NYSE:NLY), Affiliated Managers Group, Inc. (NYSE:AMG), and HollyFrontier Corp (NYSE:HFC). This group of stocks’ market valuations resemble BWA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WU 28 885467 -7
NLY 23 267347 3
AMG 34 547877 7
HFC 40 1023227 14

As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $681 million. That figure was $485 million in BWA’s case. HollyFrontier Corp (NYSE:HFC) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 23 bullish hedge fund positions. BorgWarner Inc. (NYSE:BWA) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HFC might be a better candidate to consider a long position.