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Were Hedge Funds Right About Selling Ball Corporation (BLL)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards Ball Corporation (NYSE:BLL) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Ball Corporation (NYSE:BLL) shareholders have witnessed a decrease in hedge fund interest in recent months. BLL was in 41 hedge funds’ portfolios at the end of March. There were 44 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 Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are several indicators investors employ to size up their holdings. Two of the most innovative indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outpace the S&P 500 by a very impressive amount (see the details here).

Harold Levy Iridian Asset Management

Harold Levy of Iridian Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the latest hedge fund action regarding Ball Corporation (NYSE:BLL).

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

At Q1’s end, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BLL over the last 18 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

More specifically, Chilton Investment Company was the largest shareholder of Ball Corporation (NYSE:BLL), with a stake worth $200.1 million reported as of the end of September. Trailing Chilton Investment Company was Iridian Asset Management, which amassed a stake valued at $136.1 million. Two Sigma Advisors, Select Equity Group, and MIG Capital 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 SAYA Management allocated the biggest weight to Ball Corporation (NYSE:BLL), around 11.28% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, dishing out 7.58 percent of its 13F equity portfolio to BLL.

Because Ball Corporation (NYSE:BLL) has experienced a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that elected to cut their entire stakes by the end of the first quarter. At the top of the heap, Clint Carlson’s Carlson Capital sold off the largest stake of the “upper crust” of funds followed by Insider Monkey, valued at close to $32.3 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $24.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Ball Corporation (NYSE:BLL). We will take a look at CRH PLC (NYSE:CRH), TE Connectivity Ltd. (NYSE:TEL), American International Group Inc (NYSE:AIG), and Verisign, Inc. (NASDAQ:VRSN). This group of stocks’ market caps match BLL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRH 10 131812 5
TEL 33 1381411 -11
AIG 43 1473892 -9
VRSN 41 5645444 3
Average 31.75 2158140 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $2158 million. That figure was $698 million in BLL’s case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 10 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately BLL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BLL were disappointed as the stock returned 7.7% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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