How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Brixmor Property Group Inc (NYSE:BRX) and determine whether hedge funds had an edge regarding this stock.
Is Brixmor Property Group Inc (NYSE:BRX) a marvelous investment right now? Prominent investors were taking a bullish view. The number of long hedge fund positions advanced by 12 recently. Our calculations also showed that BRX 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.
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 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 58 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.
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the fresh hedge fund action surrounding Brixmor Property Group Inc (NYSE:BRX).
What does smart money think about Brixmor Property Group Inc (NYSE:BRX)?
Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 75% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BRX over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Brixmor Property Group Inc (NYSE:BRX) was held by Renaissance Technologies, which reported holding $34.3 million worth of stock at the end of September. It was followed by Carlson Capital with a $15.8 million position. Other investors bullish on the company included Citadel Investment Group, Winton Capital Management, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Hill Winds Capital allocated the biggest weight to Brixmor Property Group Inc (NYSE:BRX), around 1.45% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, designating 0.63 percent of its 13F equity portfolio to BRX.
As one would reasonably expect, specific money managers were breaking ground themselves. Balyasny Asset Management, managed by Dmitry Balyasny, established the most outsized position in Brixmor Property Group Inc (NYSE:BRX). Balyasny Asset Management had $2.8 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also made a $1.1 million investment in the stock during the quarter. The other funds with brand new BRX positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, David Costen Haley’s HBK Investments, and Mike Vranos’s Ellington.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Brixmor Property Group Inc (NYSE:BRX) but similarly valued. These stocks are Affiliated Managers Group, Inc. (NYSE:AMG), Grupo Aeroportuario del Sureste (NYSE:ASR), Hanesbrands Inc. (NYSE:HBI), and RBC Bearings Incorporated (NASDAQ:ROLL). This group of stocks’ market valuations resemble BRX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMG | 27 | 309620 | -11 |
| ASR | 4 | 31709 | -6 |
| HBI | 36 | 364607 | -4 |
| ROLL | 9 | 39699 | -1 |
| Average | 19 | 186409 | -5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $79 million in BRX’s case. Hanesbrands Inc. (NYSE:HBI) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Sureste (NYSE:ASR) is the least popular one with only 4 bullish hedge fund positions. Brixmor Property Group Inc (NYSE:BRX) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on BRX as the stock returned 40% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Brixmor Property Group Inc. (NYSE:BRX)
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Disclosure: None. This article was originally published at Insider Monkey.
