We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like BGC Partners, Inc. (NASDAQ:BGCP).
Is BGC Partners, Inc. (NASDAQ:BGCP) a good investment today? The best stock pickers are getting less bullish. The number of long hedge fund bets decreased by 4 lately. Our calculations also showed that BGCP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). BGCP was in 21 hedge funds’ portfolios at the end of the third quarter of 2019. There were 25 hedge funds in our database with BGCP positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
George Soros of Soros Fund Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to review the latest hedge fund action surrounding BGC Partners, Inc. (NASDAQ:BGCP).
How have hedgies been trading BGC Partners, Inc. (NASDAQ:BGCP)?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BGCP over the last 17 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
The largest stake in BGC Partners, Inc. (NASDAQ:BGCP) was held by Cardinal Capital, which reported holding $81.7 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $46.5 million position. Other investors bullish on the company included Rubric Capital Management, Soros Fund Management, and Millennium Management. In terms of the portfolio weights assigned to each position Cruiser Capital Advisors allocated the biggest weight to BGC Partners, Inc. (NASDAQ:BGCP), around 4.65% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, dishing out 3.34 percent of its 13F equity portfolio to BGCP.
Judging by the fact that BGC Partners, Inc. (NASDAQ:BGCP) has faced a decline in interest from hedge fund managers, logic holds that there is a sect of fund managers that decided to sell off their entire stakes heading into Q4. At the top of the heap, Minhua Zhang’s Weld Capital Management said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, worth an estimated $1.3 million in stock, and Steve Pei’s Gratia Capital was right behind this move, as the fund dropped about $0.9 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds heading into Q4.
Let’s now take a look at hedge fund activity in other stocks similar to BGC Partners, Inc. (NASDAQ:BGCP). These stocks are Scientific Games Corporation (NASDAQ:SGMS), Ligand Pharmaceuticals Incorporated (NASDAQ:LGND), AssetMark Financial Holdings, Inc. (NYSE:AMK), and Great Western Bancorp Inc (NYSE:GWB). All of these stocks’ market caps resemble BGCP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SGMS | 25 | 575551 | -2 |
| LGND | 20 | 371572 | 1 |
| AMK | 10 | 44658 | 10 |
| GWB | 11 | 46049 | 2 |
| Average | 16.5 | 259458 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $259 million. That figure was $270 million in BGCP’s case. Scientific Games Corporation (NASDAQ:SGMS) is the most popular stock in this table. On the other hand AssetMark Financial Holdings, Inc. (NYSE:AMK) is the least popular one with only 10 bullish hedge fund positions. BGC Partners, Inc. (NASDAQ:BGCP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on BGCP, though not to the same extent, as the stock returned 8.1% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
