Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether John Bean Technologies Corporation (NYSE:JBT) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
John Bean Technologies Corporation (NYSE:JBT) was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. JBT has experienced an increase in hedge fund interest of late. There were 15 hedge funds in our database with JBT holdings at the end of the previous quarter. Our calculations also showed that JBT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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.
Phill Gross of Adage Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the new hedge fund action regarding John Bean Technologies Corporation (NYSE:JBT).
How have hedgies been trading John Bean Technologies Corporation (NYSE:JBT)?
At the end of the fourth 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 previous quarter. The graph below displays the number of hedge funds with bullish position in JBT over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of John Bean Technologies Corporation (NYSE:JBT), with a stake worth $80.5 million reported as of the end of September. Trailing Royce & Associates was Adage Capital Management, which amassed a stake valued at $33.8 million. Citadel Investment Group, D E Shaw, and Millennium Management 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 Albar Capital allocated the biggest weight to John Bean Technologies Corporation (NYSE:JBT), around 0.96% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.72 percent of its 13F equity portfolio to JBT.
Consequently, key money managers have been driving this bullishness. Adage Capital Management, managed by Phill Gross and Robert Atchinson, assembled the biggest position in John Bean Technologies Corporation (NYSE:JBT). Adage Capital Management had $33.8 million invested in the company at the end of the quarter. Javier Velazquez’s Albar Capital also initiated a $2.2 million position during the quarter. The other funds with brand new JBT positions are Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Qing Li’s Sciencast Management.
Let’s go over hedge fund activity in other stocks similar to John Bean Technologies Corporation (NYSE:JBT). We will take a look at Physicians Realty Trust (NYSE:DOC), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), Simpson Manufacturing Co, Inc. (NYSE:SSD), and White Mountains Insurance Group Ltd (NYSE:WTM). All of these stocks’ market caps are similar to JBT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DOC | 11 | 94668 | -4 |
| CSOD | 29 | 725972 | 7 |
| SSD | 24 | 284021 | 9 |
| WTM | 16 | 163990 | -1 |
| Average | 20 | 317163 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $317 million. That figure was $144 million in JBT’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Physicians Realty Trust (NYSE:DOC) is the least popular one with only 11 bullish hedge fund positions. John Bean Technologies Corporation (NYSE:JBT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately JBT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); JBT investors were disappointed as the stock returned -35.5% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
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.
