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Should You Avoid BWX Technologies Inc (BWXT)?

Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards BWX Technologies Inc (NYSE:BWXT).

BWX Technologies Inc (NYSE:BWXT) was in 22 hedge funds’ portfolios at the end of the fourth quarter of 2019. BWXT investors should be aware of a decrease in activity from the world’s largest hedge funds recently. There were 25 hedge funds in our database with BWXT holdings at the end of the previous quarter. Our calculations also showed that BWXT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

To the average investor there are a multitude of methods stock traders use to analyze their holdings. A pair of the best methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat their index-focused peers by a healthy margin (see the details here).

BRIDGEWATER ASSOCIATES

Ray Dalio of Bridgewater Associates

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the recent hedge fund action encompassing BWX Technologies Inc (NYSE:BWXT).

How have hedgies been trading BWX Technologies Inc (NYSE:BWXT)?

At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BWXT over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in BWX Technologies Inc (NYSE:BWXT), which was worth $14 million at the end of the third quarter. On the second spot was Mountaineer Partners Management which amassed $13.8 million worth of shares. Two Sigma Advisors, GLG Partners, and Ancora Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mountaineer Partners Management allocated the biggest weight to BWX Technologies Inc (NYSE:BWXT), around 15.34% of its 13F portfolio. GRT Capital Partners is also relatively very bullish on the stock, setting aside 1 percent of its 13F equity portfolio to BWXT.

Because BWX Technologies Inc (NYSE:BWXT) has experienced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that Donald Sussman’s Paloma Partners said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, valued at close to $1.1 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dropped its stock, about $0.5 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to BWX Technologies Inc (NYSE:BWXT). These stocks are Lincoln Electric Holdings, Inc. (NASDAQ:LECO), First Solar, Inc. (NASDAQ:FSLR), Gildan Activewear Inc (NYSE:GIL), and Companhia Brasileira de Distribuicao (NYSE:CBD). This group of stocks’ market values are closest to BWXT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LECO 16 245514 -2
FSLR 24 140318 -8
GIL 22 430332 2
CBD 9 45263 -2
Average 17.75 215357 -2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $82 million in BWXT’s case. First Solar, Inc. (NASDAQ:FSLR) is the most popular stock in this table. On the other hand Companhia Brasileira de Distribuicao (NYSE:CBD) is the least popular one with only 9 bullish hedge fund positions. BWX Technologies Inc (NYSE:BWXT) 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. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately BWXT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BWXT were disappointed as the stock returned -27.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Disclosure: None. This article was originally published at Insider Monkey.

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