Hedge Funds Are Slowly Warming Up To BWX Technologies Inc (BWXT)

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 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded BWX Technologies Inc (NYSE:BWXT) and determine whether the smart money was really smart about this stock.

Is BWX Technologies Inc (NYSE:BWXT) the right investment to pursue these days? Investors who are in the know were taking an optimistic view. The number of long hedge fund bets rose by 3 lately. BWX Technologies Inc (NYSE:BWXT) was in 27 hedge funds’ portfolios at the end of June. The all time high for this statistics is 34. Our calculations also showed that BWXT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a gander at the new hedge fund action regarding BWX Technologies Inc (NYSE:BWXT).

How are hedge funds trading BWX Technologies Inc (NYSE:BWXT)?

At the end of the second quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in BWXT a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Cardinal Capital held the most valuable stake in BWX Technologies Inc (NYSE:BWXT), which was worth $70.8 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $17.3 million worth of shares. Citadel Investment Group, PDT Partners, and Winton Capital 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 Mountaineer Partners Management allocated the biggest weight to BWX Technologies Inc (NYSE:BWXT), around 5% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, dishing out 2.96 percent of its 13F equity portfolio to BWXT.

Now, specific money managers have jumped into BWX Technologies Inc (NYSE:BWXT) headfirst. Sciencast Management, managed by Qing Li, established the most outsized position in BWX Technologies Inc (NYSE:BWXT). Sciencast Management had $0.9 million invested in the company at the end of the quarter. Jinghua Yan’s TwinBeech Capital also made a $0.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Benjamin A. Smith’s Laurion Capital Management, D. E. Shaw’s D E Shaw, and Bruce Kovner’s Caxton Associates LP.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BWX Technologies Inc (NYSE:BWXT) but similarly valued. These stocks are Reinsurance Group of America Inc (NYSE:RGA), Douglas Emmett, Inc. (NYSE:DEI), Dunkin Brands Group Inc (NASDAQ:DNKN), First American Financial Corp (NYSE:FAF), Jones Lang LaSalle Inc (NYSE:JLL), Woori Financial Group Inc. (NYSE:WF), and Corelogic Inc (NYSE:CLGX). All of these stocks’ market caps are similar to BWXT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.9 hedge funds with bullish positions and the average amount invested in these stocks was $516 million. That figure was $141 million in BWXT’s case. First American Financial Corp (NYSE:FAF) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 5 bullish hedge fund positions. BWX Technologies Inc (NYSE:BWXT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BWXT is 60. 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. 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 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 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately BWXT wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BWXT investors were disappointed as the stock returned 1.6% since Q2 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 most of these stocks already outperformed the market in 2020.

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