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Were Hedge Funds Right About Flocking Into BlackBerry Limited (BB) ?

“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards BlackBerry Limited (NYSE:BB) and see how it was affected.

Is BlackBerry Limited (NYSE:BB) a buy here? Prominent investors are taking an optimistic view. The number of bullish hedge fund positions moved up by 5 lately. Our calculations also showed that BB isn’t among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Irving Kahn

We’re going to take a glance at the new hedge fund action regarding BlackBerry Limited (NYSE:BB).

How have hedgies been trading BlackBerry Limited (NYSE:BB)?

At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 28% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BB over the last 14 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

BB_apr2019

The largest stake in BlackBerry Limited (NYSE:BB) was held by Iridian Asset Management, which reported holding $99.4 million worth of stock at the end of September. It was followed by Kahn Brothers with a $32.6 million position. Other investors bullish on the company included AQR Capital Management, D E Shaw, and Citadel Investment Group.

Consequently, key money managers have jumped into BlackBerry Limited (NYSE:BB) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in BlackBerry Limited (NYSE:BB). Arrowstreet Capital had $11.1 million invested in the company at the end of the quarter. Glenn Russell Dubin’s Highbridge Capital Management also made a $2 million investment in the stock during the quarter. The other funds with brand new BB positions are Marc Majzner’s Clearline Capital, Minhua Zhang’s Weld Capital Management, and David Andre and Astro Teller’s Cerebellum Capital.

Let’s also examine hedge fund activity in other stocks similar to BlackBerry Limited (NYSE:BB). These stocks are Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), Integra Lifesciences Holdings Corp (NASDAQ:IART), Gates Industrial Corporation plc (NYSE:GTES), and SINA Corp (NASDAQ:SINA). This group of stocks’ market valuations are closest to BB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CBRL 19 196110 7
IART 18 129212 4
GTES 8 8961 -1
SINA 21 439559 -3
Average 16.5 193461 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $581 million in BB’s case. SINA Corp (NASDAQ:SINA) is the most popular stock in this table. On the other hand Gates Industrial Corporation plc (NYSE:GTES) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks BlackBerry Limited (NYSE:BB) is more popular among hedge funds. 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. Hedge funds were also right about betting on BB as the stock returned 30.2% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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