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Were Hedge Funds Right About Souring On Baker Hughes, a GE company (BHGE)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have gone over 730 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 28th. In this article we look at what those investors think of Baker Hughes, a GE company (NYSE:BHGE).

Baker Hughes, a GE company (NYSE:BHGE) was in 18 hedge funds’ portfolios at the end of June. BHGE shareholders have witnessed a decrease in hedge fund interest in recent months. There were 23 hedge funds in our database with BHGE positions at the end of the previous quarter. Our calculations also showed that BHGE isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most shareholders, hedge funds are perceived as worthless, outdated investment tools of the past. While there are over 8000 funds trading at present, We look at the upper echelon of this club, approximately 750 funds. These investment experts administer bulk of the hedge fund industry’s total capital, and by tailing their top picks, Insider Monkey has found many investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points per year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

BHGE_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the latest hedge fund action regarding Baker Hughes, a GE company (NYSE:BHGE).

Hedge fund activity in Baker Hughes, a GE company (NYSE:BHGE)

At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in BHGE over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

SAC CAPITAL ADVISORS

The largest stake in Baker Hughes, a GE company (NYSE:BHGE) was held by Pzena Investment Management, which reported holding $155.6 million worth of stock at the end of March. It was followed by Millennium Management with a $72.9 million position. Other investors bullish on the company included Two Sigma Advisors, Adage Capital Management, and Point72 Asset Management.

Because Baker Hughes, a GE company (NYSE:BHGE) has witnessed a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few funds who sold off their positions entirely in the second quarter. Intriguingly, Anand Parekh’s Alyeska Investment Group dropped the biggest stake of the 750 funds tracked by Insider Monkey, worth close to $25 million in stock. Clint Carlson’s fund, Carlson Capital, also dumped its stock, about $10.8 million worth. These moves are interesting, as total hedge fund interest dropped by 5 funds in the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Baker Hughes, a GE company (NYSE:BHGE) but similarly valued. We will take a look at MPLX LP (NYSE:MPLX), Global Payments Inc (NYSE:GPN), McKesson Corporation (NYSE:MCK), and BT Group plc (NYSE:BT). This group of stocks’ market valuations match BHGE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MPLX 11 511213 1
GPN 37 1255484 8
MCK 36 2070783 4
BT 12 83150 -2
Average 24 980158 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $980 million. That figure was $337 million in BHGE’s case. Global Payments Inc (NYSE:GPN) is the most popular stock in this table. On the other hand MPLX LP (NYSE:MPLX) is the least popular one with only 11 bullish hedge fund positions. Baker Hughes, a GE company (NYSE:BHGE) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BHGE wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BHGE investors were disappointed as the stock returned -5.1% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

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