Is Sothebys (BID) A Good Stock To Buy Now?

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Sothebys (NYSE:BID) .

Is Sothebys (NYSE:BID) a bargain? Prominent investors are becoming hopeful. The number of long hedge fund investments inched up by 4 in recent months. BIDwas in 20 hedge funds’ portfolios at the end of the third quarter of 2016. There were 16 hedge funds in our database with BID holdings at the end of the previous quarter. At the end of this article we will also compare BID to other stocks including Shutterstock Inc (NYSE:SSTK), American States Water Co (NYSE:AWR), and bluebird bio Inc (NASDAQ:BLUE) to get a better sense of its popularity.

What have hedge funds been doing with Sothebys (NYSE:BID)?

Heading into the fourth quarter of 2016, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a rise of 25% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in BID at the beginning of this year. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Dan Loeb’s Third Point has the largest position in Sothebys (NYSE:BID), worth close to $253.3 million, comprising 2.2% of its total 13F portfolio. Coming in second is Richard McGuire of Marcato Capital Management, with a $177.6 million position; the fund has 15.3% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions consist of Ken Fisher’s Fisher Asset Management, John W. Rogers’ Ariel Investments and D. E. Shaw’s D E Shaw. We should note that none of these hedge funds are in our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now, some big names were leading the bulls’ herd. Citadel Investment Group, led by Ken Griffin, established the most valuable call position in Sothebys (NYSE:BID). Citadel Investment Group had $5.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $3.5 million investment in the stock during the quarter. The following funds were also among the new BID investors: Neil Chriss’ Hutchin Hill Capital, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and Matthew Tewksbury’s Stevens Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Sothebys (NYSE:BID) but similarly valued. These stocks are Shutterstock Inc (NYSE:SSTK), American States Water Co (NYSE:AWR), bluebird bio Inc (NASDAQ:BLUE), and Seadrill Ltd (NYSE:SDRL). All of these stocks’ market caps are similar to BID’s market cap.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $559 million in BID’s case. bluebird bio Inc (NASDAQ:BLUE) is the most popular stock in this table. On the other hand American States Water Co (NYSE:AWR) is the least popular one with only 8 bullish hedge fund positions. Sothebys (NYSE:BID) 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 BLUE might be a better candidate to consider taking a long position in.

Disclosure: None