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Were Hedge Funds Right About Ball Corporation (BLL)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 835 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Ball Corporation (NYSE:BLL) based on those filings.

Ball Corporation (NYSE:BLL) was in 44 hedge funds’ portfolios at the end of December. BLL shareholders have witnessed an increase in hedge fund interest of late. There were 34 hedge funds in our database with BLL positions at the end of the previous quarter. Our calculations also showed that BLL 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).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

CHILTON INVESTMENT COMPANY

Richard Chilton of Chilton Investment Company

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now we’re going to review the latest hedge fund action encompassing Ball Corporation (NYSE:BLL).

How are hedge funds trading Ball Corporation (NYSE:BLL)?

At the end of the fourth quarter, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BLL over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Chilton Investment Company held the most valuable stake in Ball Corporation (NYSE:BLL), which was worth $201.7 million at the end of the third quarter. On the second spot was Iridian Asset Management which amassed $125.2 million worth of shares. Two Sigma Advisors, MIG Capital, and Point72 Asset Management 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 Chilton Investment Company allocated the biggest weight to Ball Corporation (NYSE:BLL), around 6.45% of its 13F portfolio. MIG Capital is also relatively very bullish on the stock, setting aside 5.18 percent of its 13F equity portfolio to BLL.

As industrywide interest jumped, specific money managers have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in Ball Corporation (NYSE:BLL). Point72 Asset Management had $38.3 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also initiated a $32.3 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Greg Poole’s Echo Street Capital Management, and Clint Murray’s Lodge Hill Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ball Corporation (NYSE:BLL) but similarly valued. We will take a look at Copart, Inc. (NASDAQ:CPRT), Ameriprise Financial, Inc. (NYSE:AMP), IAC/InterActiveCorp (NASDAQ:IAC), and Smith & Nephew plc (NYSE:SNN). This group of stocks’ market caps resemble BLL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CPRT 46 984642 3
AMP 37 1122580 8
IAC 71 3319257 16
SNN 3 131490 -3
Average 39.25 1389492 6

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $1389 million. That figure was $680 million in BLL’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Smith & Nephew plc (NYSE:SNN) is the least popular one with only 3 bullish hedge fund positions. Ball Corporation (NYSE:BLL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but still beat the market by 12.9 percentage points. Hedge funds were also right about betting on BLL as the stock returned 1.7% in 2020 (through May 1st) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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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