Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Brighthouse Financial, Inc. (NASDAQ:BHF) to find out whether there were any major changes in hedge funds’ views.
Is Brighthouse Financial, Inc. (NASDAQ:BHF) a great stock to buy now? Investors who are in the know were getting less bullish. The number of long hedge fund positions were trimmed by 5 in recent months. Brighthouse Financial, Inc. (NASDAQ:BHF) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 43. Our calculations also showed that BHF isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 33 hedge funds in our database with BHF holdings at the end of December.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a look at the latest hedge fund action surrounding Brighthouse Financial, Inc. (NASDAQ:BHF).
Do Hedge Funds Think BHF Is A Good Stock To Buy Now?
At first quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BHF over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, David Einhorn’s Greenlight Capital has the biggest position in Brighthouse Financial, Inc. (NASDAQ:BHF), worth close to $161.1 million, accounting for 11.2% of its total 13F portfolio. Sitting at the No. 2 spot is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $74.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Emanuel J. Friedman’s EJF Capital, Matthew Stadelman’s Diamond Hill Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Greenlight Capital allocated the biggest weight to Brighthouse Financial, Inc. (NASDAQ:BHF), around 11.21% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, setting aside 4.46 percent of its 13F equity portfolio to BHF.
Seeing as Brighthouse Financial, Inc. (NASDAQ:BHF) has experienced a decline in interest from hedge fund managers, it’s easy to see that there is a sect of funds that elected to cut their entire stakes by the end of the first quarter. Interestingly, Noam Gottesman’s GLG Partners dropped the biggest stake of the 750 funds monitored by Insider Monkey, comprising close to $6.7 million in stock, and Valerie Malter’s Matarin Capital was right behind this move, as the fund cut about $2.6 million worth. These moves are important to note, as aggregate hedge fund interest fell by 5 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Brighthouse Financial, Inc. (NASDAQ:BHF). These stocks are Glaukos Corporation (NYSE:GKOS), Spire Inc. (NYSE:SR), New Jersey Resources Corp (NYSE:NJR), Legend Biotech Corporation (NASDAQ:LEGN), Red Rock Resorts, Inc. (NASDAQ:RRR), 360 DigiTech, Inc. (NASDAQ:QFIN), and Asbury Automotive Group, Inc. (NYSE:ABG). This group of stocks’ market valuations resemble BHF’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $540 million in BHF’s case. Red Rock Resorts, Inc. (NASDAQ:RRR) is the most popular stock in this table. On the other hand Spire Inc. (NYSE:SR) is the least popular one with only 9 bullish hedge fund positions. Brighthouse Financial, Inc. (NASDAQ:BHF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BHF is 69.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately BHF wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BHF were disappointed as the stock returned -1.3% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.