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Sothebys (BID): Are Hedge Funds Right About This Stock?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Sothebys (NYSE:BID).

Sothebys (NYSE:BID) investors should pay attention to an increase in enthusiasm from smart money in recent months. 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 Brandywine Realty Trust (NYSE:BDN), The Geo Group, Inc. (NYSE:GEO), and DiamondRock Hospitality Company (NYSE:DRH) to gather more data points.

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According to most investors, hedge funds are assumed to be slow, old financial tools of the past. While there are greater than 8000 funds trading today, Our researchers choose to focus on the crème de la crème of this club, around 700 funds. It is estimated that this group of investors oversee the majority of the hedge fund industry’s total asset base, and by monitoring their inimitable stock picks, Insider Monkey has formulated numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, let’s view the recent action encompassing Sothebys (NYSE:BID).

What does the smart money think about Sothebys (NYSE:BID)?

At the Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Dan Loeb’s Third Point has the number one position in Sothebys (NYSE:BID), worth close to $212.7 million, amounting to 2% of its total 13F portfolio. Coming in second is Richard McGuire’s Marcato Capital Management, with a $210.2 million position; 10.5% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions contain Josh Resnick’s Jericho Capital Asset Management, Chuck Royce’s Royce & Associates and Lee Munder’s Lee Munder Capital Group.

As one would reasonably expect, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, established the most valuable position in Sothebys (NYSE:BID). Point72 Asset Management had $32 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $3 million investment in the stock during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, and Paul Tudor Jones’ Tudor Investment Corp.

Let’s now take a look at hedge fund activity in other stocks similar to Sothebys (NYSE:BID). We will take a look at Brandywine Realty Trust (NYSE:BDN), The Geo Group, Inc. (NYSE:GEO), DiamondRock Hospitality Company (NYSE:DRH), and Euronav NV Ordinary Shares (NYSE:EURN). This group of stocks’ market values match BID’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BDN 17 152885 1
GEO 16 72961 -2
DRH 13 30147 -1
EURN 21 409682 2

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $899 million in BID’s case. Euronav NV Ordinary Shares (NYSE:EURN) is the most popular stock in this table with a total of 21 funds reporting long positions, while DiamondRock Hospitality Company (NYSE:DRH) is the least popular one. Compared to these stocks, Sothebys (NYSE:BID) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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