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Were Hedge Funds Right About BRP Inc. (DOOO)?

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. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is BRP Inc. (NASDAQ:DOOO), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

BRP Inc. (NASDAQ:DOOO) investors should pay attention to a decrease in support from the world’s most elite money managers in recent months. Our calculations also showed that DOOO 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).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. 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 (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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. Keeping this in mind let’s take a look at the fresh hedge fund action regarding BRP Inc. (NASDAQ:DOOO).

What have hedge funds been doing with BRP Inc. (NASDAQ:DOOO)?

At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in DOOO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Arrowstreet Capital was the largest shareholder of BRP Inc. (NASDAQ:DOOO), with a stake worth $49.6 million reported as of the end of September. Trailing Arrowstreet Capital was Marshall Wace LLP, which amassed a stake valued at $36.4 million. GLG Partners, Two Sigma Advisors, and Renaissance Technologies 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 Marshall Wace LLP allocated the biggest weight to BRP Inc. (NASDAQ:DOOO), around 0.25% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, setting aside 0.12 percent of its 13F equity portfolio to DOOO.

Seeing as BRP Inc. (NASDAQ:DOOO) has faced falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of funds that decided to sell off their full holdings heading into Q4. Interestingly, Mark Broach’s Manatuck Hill Partners sold off the biggest investment of the 750 funds watched by Insider Monkey, comprising close to $4.6 million in stock. George Zweig, Shane Haas and Ravi Chander’s fund, Signition LP, also dropped its stock, about $0.3 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to BRP Inc. (NASDAQ:DOOO). These stocks are Hecla Mining Company (NYSE:HL), Tilray, Inc. (NASDAQ:TLRY), CSG Systems International, Inc. (NASDAQ:CSGS), and Cardiovascular Systems Inc (NASDAQ:CSII). This group of stocks’ market valuations are similar to DOOO’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HL 14 78944 4
TLRY 15 41042 0
CSGS 23 238394 3
CSII 16 135257 -1
Average 17 123409 1.5

View table here if you experience formatting issues.

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 $123 million. That figure was $126 million in DOOO’s case. CSG Systems International, Inc. (NASDAQ:CSGS) is the most popular stock in this table. On the other hand Hecla Mining Company (NYSE:HL) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks BRP Inc. (NASDAQ:DOOO) is even less popular than HL. Hedge funds dodged a bullet by taking a bearish stance towards DOOO. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. Unfortunately DOOO wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); DOOO investors were disappointed as the stock returned -65.9% 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 most of these stocks already outperformed the market so far in 2020.
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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