After a lengthy stretch of outperformance, small-cap stocks suffered from July 2015 through June 2016, as heightened global economic fears led investors to flee to the safe havens of large-cap stocks and other instruments. Those stocks outperformed small-caps by about 10 percentage points during that time, with small-cap healthcare stocks being particularly hard hit. However, the tide has since turned in a big way, as evidenced by small-caps toppling their large-cap peers by 5 percentage points in the third quarter, and by another 5 percentage points in the first seven weeks of the fourth quarter. In this article, we’ll analyze how this shift affected hedge funds’ Q3 trading of Bunge Ltd (NYSE:BG) and see how the stock is affected by the recent hedge fund activity.
Is Bunge Ltd (NYSE:BG) a healthy stock for your portfolio? The best stock pickers are in a pessimistic mood. The number of long hedge fund positions went down by 10 lately. BG was in 23 hedge funds’ portfolios at the end of September. There were 33 hedge funds in our database with BG holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Mobile TeleSystems OJSC (ADR) (NYSE:MBT), The AES Corporation (NYSE:AES), and Synopsys, Inc. (NASDAQ:SNPS) to gather more data points.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.
With all of this in mind, let’s check out the fresh action surrounding Bunge Ltd (NYSE:BG).
How have hedgies been trading Bunge Ltd (NYSE:BG)?
Heading into the fourth quarter of 2016, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a plunge of 30% from the second quarter of 2016. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Clint Carlson’s Carlson Capital has the largest position in Bunge Ltd (NYSE:BG), worth close to $181.1 million, corresponding to 2.3% of its total 13F portfolio. The second largest stake is held by Steve Cohen of Point72 Asset Management, with a $171.9 million position; 1.2% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish consist of D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Jim Simons’s Renaissance Technologies.
Seeing as Bunge Ltd (NYSE:BG) has faced falling interest from hedge fund managers, logic holds that there was a specific group of money managers that elected to cut their positions entirely last quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group cut the largest stake of the 700 funds watched by Insider Monkey, comprising about $17.8 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also dumped its stock, about $13.8 million worth of BG shares. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 10 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Bunge Ltd (NYSE:BG). We will take a look at Mobile TeleSystems OJSC (ADR) (NYSE:MBT), The AES Corporation (NYSE:AES), Synopsys, Inc. (NASDAQ:SNPS), and Harley-Davidson, Inc. (NYSE:HOG). This group of stocks’ market valuations match BG’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $308 million. That figure was $783 million in BG’s case. Harley-Davidson, Inc. (NYSE:HOG) is the most popular stock in this table. On the other hand Mobile TeleSystems OJSC (ADR) (NYSE:MBT) is the least popular one with only 17 bullish hedge fund positions. Bunge Ltd (NYSE:BG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HOG might be a better candidate to consider a long position.