Did Hedge Funds Make The Right Call On Brookdale Senior Living, Inc. (BKD)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Brookdale Senior Living, Inc. (NYSE:BKD) and determine whether the smart money was really smart about this stock.

Brookdale Senior Living, Inc. (NYSE:BKD) was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. BKD investors should pay attention to a decrease in activity from the world’s largest hedge funds lately. There were 22 hedge funds in our database with BKD positions at the end of the previous quarter. Our calculations also showed that BKD 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.

To most shareholders, hedge funds are viewed as unimportant, outdated financial vehicles of yesteryear. While there are greater than 8000 funds trading at the moment, Our researchers choose to focus on the aristocrats of this group, around 850 funds. It is estimated that this group of investors preside over the lion’s share of the hedge fund industry’s total capital, and by watching their inimitable picks, Insider Monkey has identified many investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to take a look at the key hedge fund action surrounding Brookdale Senior Living, Inc. (NYSE:BKD).

Hedge fund activity in Brookdale Senior Living, Inc. (NYSE:BKD)

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BKD over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

The largest stake in Brookdale Senior Living, Inc. (NYSE:BKD) was held by Deerfield Management, which reported holding $57.4 million worth of stock at the end of September. It was followed by Glenview Capital with a $55 million position. Other investors bullish on the company included Camber Capital Management, Renaissance Technologies, and D E Shaw. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to Brookdale Senior Living, Inc. (NYSE:BKD), around 5.91% of its 13F portfolio. Camber Capital Management is also relatively very bullish on the stock, earmarking 3.17 percent of its 13F equity portfolio to BKD.

Since Brookdale Senior Living, Inc. (NYSE:BKD) has witnessed falling interest from the smart money, it’s easy to see that there were a few money managers who sold off their entire stakes heading into Q4. At the top of the heap, Anand Parekh’s Alyeska Investment Group sold off the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $1.8 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $1.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 5 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Brookdale Senior Living, Inc. (NYSE:BKD) but similarly valued. These stocks are Cornerstone Building Brands, Inc. (NYSE:CNR), OFG Bancorp (NYSE:OFG), Archrock, Inc. (NYSE:AROC), and Blucora Inc (NASDAQ:BCOR). This group of stocks’ market caps match BKD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $236 million in BKD’s case. Cornerstone Building Brands, Inc. (NYSE:CNR) is the most popular stock in this table. On the other hand Archrock, Inc. (NYSE:AROC) is the least popular one with only 11 bullish hedge fund positions. Brookdale Senior Living, Inc. (NYSE:BKD) 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately BKD wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BKD were disappointed as the stock returned -11.5% 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.

Disclosure: None. This article was originally published at Insider Monkey.