Hedge Funds Are Selling The Blackstone Group Inc. (BX)

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about The Blackstone Group Inc. (NYSE:BX) in this article.

Is The Blackstone Group Inc. (NYSE:BX) undervalued? Prominent investors were becoming less confident. The number of long hedge fund bets retreated by 5 lately. The Blackstone Group Inc. (NYSE:BX) was in 49 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 54. Our calculations also showed that BX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 54 hedge funds in our database with BX positions at the end of the fourth quarter.

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 115 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.

John Armitage of Egerton Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a look at the key hedge fund action encompassing The Blackstone Group Inc. (NYSE:BX).

Do Hedge Funds Think BX Is A Good Stock To Buy Now?

At the end of March, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BX over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Blackstone Group Inc. (NYSE:BX) was held by Farallon Capital, which reported holding $330.3 million worth of stock at the end of December. It was followed by GQG Partners with a $182.9 million position. Other investors bullish on the company included Cryder Capital, Renaissance Technologies, and Egerton Capital Limited. In terms of the portfolio weights assigned to each position Arrow Capital Management allocated the biggest weight to The Blackstone Group Inc. (NYSE:BX), around 13.7% of its 13F portfolio. Cryder Capital is also relatively very bullish on the stock, setting aside 10.71 percent of its 13F equity portfolio to BX.

Judging by the fact that The Blackstone Group Inc. (NYSE:BX) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies who sold off their entire stakes last quarter. It’s worth mentioning that Stephen J. Errico’s Locust Wood Capital Advisers cut the biggest stake of the “upper crust” of funds followed by Insider Monkey, totaling about $27.9 million in stock, and James Parsons’s Junto Capital Management was right behind this move, as the fund dumped about $22.1 million worth. These moves are important to note, as total hedge fund interest fell by 5 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The Blackstone Group Inc. (NYSE:BX) but similarly valued. These stocks are Moderna, Inc. (NASDAQ:MRNA), Edwards Lifesciences Corporation (NYSE:EW), Honda Motor Co Ltd (NYSE:HMC), Vodafone Group Plc (NASDAQ:VOD), Aon plc (NYSE:AON), Koninklijke Philips NV (NYSE:PHG), and General Dynamics Corporation (NYSE:GD). This group of stocks’ market caps are similar to BX’s market cap.

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As you can see these stocks had an average of 31.1 hedge funds with bullish positions and the average amount invested in these stocks was $2588 million. That figure was $1626 million in BX’s case. Aon plc (NYSE:AON) is the most popular stock in this table. On the other hand Koninklijke Philips NV (NYSE:PHG) is the least popular one with only 11 bullish hedge fund positions. The Blackstone Group Inc. (NYSE:BX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BX is 58.4. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on BX as the stock returned 30.5% since the end of Q1 (through 6/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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