We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Bunge Limited (NYSE:BG) is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Bunge Limited (NYSE:BG) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare BG to other stocks including Newell Brands Inc. (NYSE:NWL), Brookfield Property Partners LP (NYSE:BPY), and Aluminum Corp. of China Limited (NYSE:ACH) to get a better sense of its popularity.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jonathan Barrett of Luminus Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the latest hedge fund action regarding Bunge Limited (NYSE:BG).
What does smart money think about Bunge Limited (NYSE:BG)?
At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 38 hedge funds with a bullish position in BG a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Bunge Limited (NYSE:BG) was held by Adage Capital Management, which reported holding $122.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $110 million position. Other investors bullish on the company included Moore Global Investments, Citadel Investment Group, and Millennium Management. In terms of the portfolio weights assigned to each position Litespeed Management allocated the biggest weight to Bunge Limited (NYSE:BG), around 5.61% of its 13F portfolio. Maso Capital is also relatively very bullish on the stock, designating 3.65 percent of its 13F equity portfolio to BG.
Because Bunge Limited (NYSE:BG) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies who sold off their entire stakes in the third quarter. It’s worth mentioning that Robert Pohly’s Samlyn Capital said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, worth about $27.7 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund dumped about $25 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Bunge Limited (NYSE:BG). We will take a look at Newell Brands Inc. (NYSE:NWL), Brookfield Property Partners LP (NYSE:BPY), Aluminum Corp. of China Limited (NYSE:ACH), and Hubbell Incorporated (NYSE:HUBB). This group of stocks’ market values resemble BG’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWL | 31 | 1424124 | -1 |
| BPY | 8 | 63332 | 0 |
| ACH | 3 | 4752 | 0 |
| HUBB | 23 | 413964 | -2 |
| Average | 16.25 | 476543 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $477 million. That figure was $690 million in BG’s case. Newell Brands Inc. (NYSE:NWL) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Bunge Limited (NYSE:BG) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately BG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BG were disappointed as the stock returned -41% during the first two and a half months of 2020 (through March 16th) 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 in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
