We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 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 The Bank of New York Mellon Corporation (NYSE:BK).
The Bank of New York Mellon Corporation (NYSE:BK) was in 50 hedge funds’ portfolios at the end of September. BK investors should pay attention to an increase in activity from the world’s largest hedge funds lately. There were 33 hedge funds in our database with BK positions at the end of the previous quarter. Our calculations also showed that BK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
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.
Warren Buffett of Berkshire Hathaway
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 as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind let’s view the recent hedge fund action regarding The Bank of New York Mellon Corporation (NYSE:BK).
How are hedge funds trading The Bank of New York Mellon Corporation (NYSE:BK)?
At Q3’s end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 52% from the second quarter of 2019. On the other hand, there were a total of 39 hedge funds with a bullish position in BK a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of The Bank of New York Mellon Corporation (NYSE:BK), with a stake worth $3659.2 million reported as of the end of September. Trailing Berkshire Hathaway was Trian Partners, which amassed a stake valued at $549.5 million. Citadel Investment Group, Yacktman Asset Management, and GAMCO Investors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Trian Partners allocated the biggest weight to The Bank of New York Mellon Corporation (NYSE:BK), around 5.74% of its 13F portfolio. Junto Capital Management is also relatively very bullish on the stock, designating 3.55 percent of its 13F equity portfolio to BK.
As one would reasonably expect, some big names have been driving this bullishness. Junto Capital Management, managed by James Parsons, initiated the most valuable position in The Bank of New York Mellon Corporation (NYSE:BK). Junto Capital Management had $59.7 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $53.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Daniel Johnson’s Gillson Capital, and Anand Parekh’s Alyeska Investment Group.
Let’s go over hedge fund activity in other stocks similar to The Bank of New York Mellon Corporation (NYSE:BK). We will take a look at ABB Ltd (NYSE:ABB), Koninklijke Philips NV (NYSE:PHG), UBS Group AG (NYSE:UBS), and Orange (NYSE:ORAN). All of these stocks’ market caps are similar to BK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ABB | 13 | 325803 | 0 |
| PHG | 7 | 173329 | -1 |
| UBS | 16 | 816881 | 2 |
| ORAN | 3 | 2104 | 1 |
| Average | 9.75 | 329529 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $5639 million in BK’s case. UBS Group AG (NYSE:UBS) is the most popular stock in this table. On the other hand Orange (NYSE:ORAN) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks The Bank of New York Mellon Corporation (NYSE:BK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately BK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BK were disappointed as the stock returned 9.6% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
