Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 9 percentage points since the end of the third quarter of 2018 as investors worried over the possible ramifications of rising interest rates and escalation of the trade war with China. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Global Brass and Copper Holdings Inc (NYSE:BRSS) and see how the stock is affected by the recent hedge fund activity.
Is Global Brass and Copper Holdings Inc (NYSE:BRSS) a buy here? Prominent investors are becoming more confident. The number of long hedge fund bets improved by 1 recently. Our calculations also showed that brss isn’t among the 30 most popular stocks among hedge funds. BRSS was in 16 hedge funds’ portfolios at the end of the first quarter of 2019. There were 15 hedge funds in our database with BRSS holdings at the end of the previous quarter.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.
Cliff Asness of AQR Capital Management
We’re going to take a peek at the fresh hedge fund action encompassing Global Brass and Copper Holdings Inc (NYSE:BRSS).
How have hedgies been trading Global Brass and Copper Holdings Inc (NYSE:BRSS)?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in BRSS over the last 15 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Global Brass and Copper Holdings Inc (NYSE:BRSS), with a stake worth $44.7 million reported as of the end of March. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $15.1 million. AQR Capital Management, GLG Partners, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Global Brass and Copper Holdings Inc (NYSE:BRSS). Arrowstreet Capital had $1.6 million invested in the company at the end of the quarter. Roger Ibbotson’s Zebra Capital Management also made a $0.3 million investment in the stock during the quarter. The only other fund with a brand new BRSS position is Thomas Bailard’s Bailard Inc.
Let’s check out hedge fund activity in other stocks similar to Global Brass and Copper Holdings Inc (NYSE:BRSS). These stocks are WideOpenWest, Inc. (NYSE:WOW), Lakeland Bancorp, Inc. (NASDAQ:LBAI), TrustCo Bank Corp NY (NASDAQ:TRST), and Ameresco Inc (NYSE:AMRC). This group of stocks’ market caps are similar to BRSS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WOW | 11 | 21590 | -2 |
| LBAI | 12 | 58117 | 0 |
| TRST | 10 | 46536 | 1 |
| AMRC | 10 | 30678 | 3 |
| Average | 10.75 | 39230 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $89 million in BRSS’s case. Lakeland Bancorp, Inc. (NASDAQ:LBAI) is the most popular stock in this table. On the other hand TrustCo Bank Corp NY (NASDAQ:TRST) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Global Brass and Copper Holdings Inc (NYSE:BRSS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on BRSS as the stock returned 27% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
