Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is British American Tobacco plc (NYSE:BTI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is British American Tobacco plc (NYSE:BTI) a buy right now? Money managers were in a bearish mood. The number of long hedge fund positions decreased by 4 recently. British American Tobacco plc (NYSE:BTI) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 30. Our calculations also showed that BTI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 11 hedge funds in our database with BTI holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. Now we’re going to review the recent hedge fund action regarding British American Tobacco plc (NYSE:BTI).
Hedge fund activity in British American Tobacco plc (NYSE:BTI)
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -36% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in BTI a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in British American Tobacco plc (NYSE:BTI) was held by Orbis Investment Management, which reported holding $688.2 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $10.1 million position. Other investors bullish on the company included PEAK6 Capital Management, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Orbis Investment Management allocated the biggest weight to British American Tobacco plc (NYSE:BTI), around 5.42% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, earmarking 0.2 percent of its 13F equity portfolio to BTI.
Because British American Tobacco plc (NYSE:BTI) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Lee Ainslie’s Maverick Capital dropped the largest stake of all the hedgies followed by Insider Monkey, comprising an estimated $66 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund cut about $3.3 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as British American Tobacco plc (NYSE:BTI) but similarly valued. We will take a look at Mondelez International Inc (NASDAQ:MDLZ), Caterpillar Inc. (NYSE:CAT), American Express Company (NYSE:AXP), Diageo plc (NYSE:DEO), HSBC Holdings plc (NYSE:HSBC), Gilead Sciences, Inc. (NASDAQ:GILD), and The Estee Lauder Companies Inc (NYSE:EL). All of these stocks’ market caps are closest to BTI’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 39.3 hedge funds with bullish positions and the average amount invested in these stocks was $4080 million. That figure was $702 million in BTI’s case. Gilead Sciences, Inc. (NASDAQ:GILD) is the most popular stock in this table. On the other hand HSBC Holdings plc (NYSE:HSBC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks British American Tobacco plc (NYSE:BTI) is even less popular than HSBC. Our overall hedge fund sentiment score for BTI is 8. 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. Hedge funds dodged a bullet by taking a bearish stance towards BTI. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd but managed to beat the market again by 16 percentage points. Unfortunately BTI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BTI investors were disappointed as the stock returned 1.5% since the end of the third quarter (through 12/2) 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 most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.