Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small-caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.
Is The Bank of New York Mellon Corporation (NYSE:BK) a buy, a sell, or a hold? Investors who are in the know are taking a bearish view. The number of long hedge fund bets retreated by 13 recently. At the end of this article we will also compare BK to other stocks including McKesson Corporation (NYSE:MCK), Carnival plc (ADR) (NYSE:CUK), and Dominion Resources, Inc. (NYSE:D) to get a better sense of its popularity.
If you’d ask most shareholders, hedge funds are perceived as worthless, outdated investment vehicles of the past. While there are over 8,000 funds trading at the moment, we look at the masters of this group, about 700 funds. Most estimates calculate that this group of people command the majority of the smart money’s total asset base, and by observing their finest stock picks, Insider Monkey has brought to light several investment strategies that have historically exceeded the market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
With all of this in mind, we’re going to analyze the key action encompassing The Bank of New York Mellon Corporation (NYSE:BK).
How are hedge funds trading The Bank of New York Mellon Corporation (NYSE:BK)?
At the end of the third quarter, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a fall of 21% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes considerably (or had already accumulated large positions).
Of the funds tracked by Insider Monkey, Nelson Peltz’s Trian Partners has the number one position in The Bank of New York Mellon Corporation (NYSE:BK), worth close to $1.18 billion, corresponding to 10.1% of its total 13F portfolio. On Trian Partners’s heels is Berkshire Hathaway, led by Warren Buffett, holding a $787.4 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Other peers with similar optimism consist of Richard McGuire’s Marcato Capital Management, Andreas Halvorsen’s Viking Global, and Donald Yacktman’s Yacktman Asset Management.
Judging by the fact that The Bank of New York Mellon Corporation (NYSE:BK) has experienced bearish sentiment from the smart money, logic holds that there lies a certain “tier” of money managers who were dropping their positions entirely heading into Q4. It’s worth mentioning that Stephen J. Errico’s Locust Wood Capital Advisers said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, totaling about $30.7 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also dumped its stock, about $30.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 13 funds heading into Q4.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The Bank of New York Mellon Corporation (NYSE:BK) but similarly valued. We will take a look at McKesson Corporation (NYSE:MCK), Carnival plc (ADR) (NYSE:CUK), Dominion Resources, Inc. (NYSE:D), and Phillips 66 (NYSE:PSX). This group of stocks’ market caps resemble BK’s market cap.
|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 33.25 hedge funds with bullish positions and the average amount invested in these stocks was $2.62 billion. That figure was $5.80 billion in BK’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand Carnival plc (ADR) (NYSE:CUK) is the least popular one with only 8 bullish hedge fund positions. The Bank of New York Mellon Corporation (NYSE:BK) 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 MCK might be a better candidate to consider a long position in.