At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Bunge Limited (NYSE:BG).
Is Bunge Limited (NYSE:BG) an attractive stock to buy now? Prominent investors are getting more bullish. The number of long hedge fund positions went up by 2 lately. Our calculations also showed that BG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 51 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Phill Gross of Adage Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a glance at the key hedge fund action surrounding Bunge Limited (NYSE:BG).
How are hedge funds trading Bunge Limited (NYSE:BG)?
At the end of the first quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BG over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Bunge Limited (NYSE:BG) was held by Adage Capital Management, which reported holding $102.3 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $71.5 million position. Other investors bullish on the company included Moore Global Investments, D E Shaw, and Candlestick Capital Management. In terms of the portfolio weights assigned to each position Manatuck Hill Partners allocated the biggest weight to Bunge Limited (NYSE:BG), around 4.89% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, earmarking 3.28 percent of its 13F equity portfolio to BG.
Consequently, specific money managers were breaking ground themselves. Candlestick Capital Management, managed by Jack Woodruff, initiated the biggest position in Bunge Limited (NYSE:BG). Candlestick Capital Management had $29.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $17.2 million investment in the stock during the quarter. The other funds with brand new BG positions are Alexander Mitchell’s Scopus Asset Management, Mark Broach’s Manatuck Hill Partners, and David Rosen’s Rubric Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Bunge Limited (NYSE:BG) but similarly valued. We will take a look at Avalara, Inc. (NYSE:AVLR), MGM Resorts International (NYSE:MGM), Post Holdings Inc (NYSE:POST), and HubSpot Inc (NYSE:HUBS). This group of stocks’ market valuations are closest to BG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AVLR | 34 | 970359 | -13 |
| MGM | 50 | 943490 | 0 |
| POST | 31 | 1195411 | -7 |
| HUBS | 27 | 662117 | -3 |
| Average | 35.5 | 942844 | -5.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $943 million. That figure was $543 million in BG’s case. MGM Resorts International (NYSE:MGM) is the most popular stock in this table. On the other hand HubSpot Inc (NYSE:HUBS) is the least popular one with only 27 bullish hedge fund positions. Bunge Limited (NYSE:BG) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately BG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BG were disappointed as the stock returned -3.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
