We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. In this article, we look at what those funds think of BRP Inc. (NASDAQ:DOOO) based on that data.
Is DOOO a good stock to buy now? Investors who are in the know were selling. The number of bullish hedge fund positions retreated by 2 recently. BRP Inc. (NASDAQ:DOOO) was in 12 hedge funds’ portfolios at the end of September. The all time high for this statistics is 16. Our calculations also showed that DOOO 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 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 take a peek at the key hedge fund action encompassing BRP Inc. (NASDAQ:DOOO).
Do Hedge Funds Think DOOO Is A Good Stock To Buy Now?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in DOOO over the last 21 quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in BRP Inc. (NASDAQ:DOOO). Arrowstreet Capital has a $56.6 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $14.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions include D. E. Shaw’s D E Shaw, Mark Broach’s Manatuck Hill Partners and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position Manatuck Hill Partners allocated the biggest weight to BRP Inc. (NASDAQ:DOOO), around 5.01% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, setting aside 0.22 percent of its 13F equity portfolio to DOOO.
Since BRP Inc. (NASDAQ:DOOO) has witnessed declining sentiment from the smart money, logic holds that there were a few fund managers that slashed their positions entirely heading into Q4. At the top of the heap, David Rosen’s Rubric Capital Management said goodbye to the largest stake of the 750 funds tracked by Insider Monkey, totaling close to $16.3 million in stock. Robert Bishop’s fund, Impala Asset Management, also dropped its stock, about $13.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to BRP Inc. (NASDAQ:DOOO). These stocks are AutoNation, Inc. (NYSE:AN), Tempur Sealy International Inc. (NYSE:TPX), Performance Food Group Company (NYSE:PFGC), BridgeBio Pharma, Inc. (NASDAQ:BBIO), Zai Lab Limited (NASDAQ:ZLAB), Science Applications International Corp (NYSE:SAIC), and Stag Industrial Inc (NYSE:STAG). This group of stocks’ market caps are similar to DOOO’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 27 hedge funds with bullish positions and the average amount invested in these stocks was $572 million. That figure was $120 million in DOOO’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand BridgeBio Pharma, Inc. (NASDAQ:BBIO) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks BRP Inc. (NASDAQ:DOOO) is even less popular than BBIO. Our overall hedge fund sentiment score for DOOO is 25.5. 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 DOOO 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on DOOO as the stock returned 19.5% since Q3 (through December 8th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.