As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the third quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Brighthouse Financial, Inc. (NASDAQ:BHF).
Brighthouse Financial, Inc. (NASDAQ:BHF) has experienced an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that BHF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Bill Miller of Miller Value Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the key hedge fund action encompassing Brighthouse Financial, Inc. (NASDAQ:BHF).
What does smart money think about Brighthouse Financial, Inc. (NASDAQ:BHF)?
At the end of the third quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in BHF 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.
Of the funds tracked by Insider Monkey, Greenlight Capital, managed by David Einhorn, holds the biggest position in Brighthouse Financial, Inc. (NASDAQ:BHF). Greenlight Capital has a $144.6 million position in the stock, comprising 10.4% of its 13F portfolio. On Greenlight Capital’s heels is Bill Miller of Miller Value Partners, with a $92.6 million position; the fund has 3.7% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Cliff Asness’s AQR Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ric Dillon’s Diamond Hill Capital. In terms of the portfolio weights assigned to each position Greenlight Capital allocated the biggest weight to Brighthouse Financial, Inc. (NASDAQ:BHF), around 10.41% of its portfolio. Elm Ridge Capital is also relatively very bullish on the stock, designating 3.84 percent of its 13F equity portfolio to BHF.
With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. EJF Capital, managed by Emanuel J. Friedman, initiated the most outsized position in Brighthouse Financial, Inc. (NASDAQ:BHF). EJF Capital had $13.7 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $1.1 million position during the quarter. The other funds with new positions in the stock are Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and Jay Petschek and Steven Major’s Corsair Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Brighthouse Financial, Inc. (NASDAQ:BHF) but similarly valued. These stocks are Marriott Vacations Worldwide Corporation (NYSE:VAC), CoreSite Realty Corporation (NYSE:COR), Mercury Systems Inc (NASDAQ:MRCY), and Aurora Cannabis Inc. (NYSE:ACB). This group of stocks’ market values are closest to BHF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VAC | 27 | 488721 | 0 |
| COR | 14 | 265606 | 0 |
| MRCY | 22 | 112572 | 1 |
| ACB | 10 | 17463 | 0 |
| Average | 18.25 | 221091 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $221 million. That figure was $529 million in BHF’s case. Marriott Vacations Worldwide Corporation (NYSE:VAC) is the most popular stock in this table. On the other hand Aurora Cannabis Inc. (NYSE:ACB) is the least popular one with only 10 bullish hedge fund positions. Brighthouse Financial, Inc. (NASDAQ:BHF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BHF wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BHF were disappointed as the stock returned 1.7% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
