Most hedge funds don’t make as much money as they did in the 1990’s and the first half of the previous decade, where alpha in excess of 10% was the norm. So, while investing in hedge funds might not be nearly as profitable as it once was, especially taking into account many firms’ high fees, the collective picks of these investment managers can still provide valuable insight into which stocks are likely to outperform their peers. This is why, in this article, we will take a look into what the more than 765 funds that we track think of other investment firms that trade on U.S exchanges and uncover how much support these stocks have from them.
Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).
Blackstone Group LP (NYSE:BX)
The Blackstone Group LP (NYSE:BX) was in the portfolio of 29 hedge funds in our database at the end of March, including Robert Joseph Caruso’s Select Equity Group, which owned 7.21 million shares, and John W. Rogers’ Ariel Investments, with ownership of 1.49 million shares.
Shares of Blackstone Group LP (NYSE:BX) have lost 5.45% in the second quarter and are down by 9.3% year-to-date. On Thursday, Bloomberg reported that the company had agreed to sell the Hyatt Regency Waikiki Beach Resort and Spa to Mirae Asset Global Investments for $780 million. As per the media outlet, the sale price implies a profit of more than $200 million for Blackstone in just three years.
Invesco Ltd. (NYSE:IVZ)
Among the funds that we track, 30 held long positions in Invesco Ltd. (NYSE:IVZ) at the end of the first quarter, owning 3.2% of the stock’s float. Large investors included Richard S. Pzena’s Pzena Investment Management, which boosted its stake by 55% during the first quarter, to 2.07 million shares, and John Brennan’s Sirios Capital Management, which initiated a position of 1.53 million shares during the quarter.
Shares of Invesco Ltd. (NYSE:IVZ) fell by 8.09% over the first three months of this year, and have continued to tumble in the second quarter, by another 5.52%. One of the main drivers of the decline in the second quarter were top and bottom-line misses in the company’s first quarter financial results, which were released on April 28. EPS of $0.49 and revenue of $818.1 million for the quarter missed estimates by $0.05 and $35.24 million, respectively. That led to a couple of analyst downgrades, which have put further strain on the stock.
We’ll check out the three investment management firms that are the most favored by their elite peers on the next page.