Were Hedge Funds Right About Dumping Blue Bird Corporation (BLBD) ?

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 15 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 19.7% during the first 2.5 months of 2019 (vs. 13.1% gain for SPY), with 93% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Blue Bird Corporation (NASDAQ:BLBD).

Is Blue Bird Corporation (NASDAQ:BLBD) ready to rally soon? Prominent investors are selling. The number of bullish hedge fund positions dropped by 11 lately. Our calculations also showed that blbd isn’t among the 30 most popular stocks among hedge funds. BLBD was in 7 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 18 hedge funds in our database with BLBD positions at the end of the previous quarter.

In today’s marketplace there are several metrics stock traders have at their disposal to grade stocks. A duo of the less utilized metrics are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can trounce the market by a significant amount (see the details here).

Arnaud Ajdler Engine Capital

Arnaud Ajdler Engine Capital

Let’s view the key hedge fund action surrounding Blue Bird Corporation (NASDAQ:BLBD).

Hedge fund activity in Blue Bird Corporation (NASDAQ:BLBD)

At Q4’s end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -61% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in BLBD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with BLBD Positions

Among these funds, Osterweis Capital Management held the most valuable stake in Blue Bird Corporation (NASDAQ:BLBD), which was worth $44.3 million at the end of the fourth quarter. On the second spot was Spitfire Capital which amassed $17.3 million worth of shares. Moreover, Renaissance Technologies, Citadel Investment Group, and Engine Capital were also bullish on Blue Bird Corporation (NASDAQ:BLBD), allocating a large percentage of their portfolios to this stock.

Due to the fact that Blue Bird Corporation (NASDAQ:BLBD) has faced declining sentiment from hedge fund managers, we can see that there lies a certain “tier” of fund managers who were dropping their entire stakes last quarter. It’s worth mentioning that Paul Glazer’s Glazer Capital said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $28.2 million in stock. Jeffrey Tannenbaum’s fund, Fir Tree, also dumped its stock, about $20.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 11 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Blue Bird Corporation (NASDAQ:BLBD) but similarly valued. We will take a look at Crawford & Company (NYSE:CRD), Donnelley Financial Solutions, Inc. (NYSE:DFIN), Anika Therapeutics, Inc. (NASDAQ:ANIK), and Hemisphere Media Group Inc (NASDAQ:HMTV). This group of stocks’ market valuations match BLBD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRD 6 26707 -1
DFIN 19 54777 5
ANIK 14 53849 1
HMTV 6 42074 -2
Average 11.25 44352 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $70 million in BLBD’s case. Donnelley Financial Solutions, Inc. (NYSE:DFIN) is the most popular stock in this table. On the other hand Crawford & Company (NYSE:CRD) is the least popular one with only 6 bullish hedge fund positions. Blue Bird Corporation (NASDAQ:BLBD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately BLBD wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); BLBD investors were disappointed as the stock returned 3.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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