Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is BGC Partners, Inc. (NASDAQ:BGCP) a bargain? The smart money is becoming less confident. The number of long hedge fund positions that are disclosed in regulatory 13F filings slashed by 2 lately. BGCP was in 18 hedge funds’ portfolios at the end of September. There were 20 hedge funds in our database with BGCP positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Summit Materials Inc (NYSE:SUM), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), and Lexington Realty Trust (NYSE:LXP) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about BGC Partners, Inc. (NASDAQ:BGCP)?
At the end of the third quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a fall of 10% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in BGCP over the last 5 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Amy Minella’s Cardinal Capital holds the biggest position in BGC Partners, Inc. (NASDAQ:BGCP). Cardinal Capital has a $65.3 million position in the stock, comprising 3% of its 13F portfolio. Sitting at the No. 2 spot is Jim Simons’ Renaissance Technologies, with a $7.9 million position. Remaining members of the smart money with similar optimism comprise Steve Cohen’s Point72 Asset Management, Ken Griffin’s Citadel Investment Group and David Rodriguez-Fraile’s BlueMar Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Judging by the fact that BGC Partners, Inc. (NASDAQ:BGCP) has encountered declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies that elected to cut their positions entirely last quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the largest position of all the hedgies followed by Insider Monkey, totaling about $5.8 million in stock. Matthew Taylor and Ty Popplewell’s fund, Kortright Capital Partners, also dropped its stock, about $5.7 million worth.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as BGC Partners, Inc. (NASDAQ:BGCP) but similarly valued. These stocks are Summit Materials Inc (NYSE:SUM), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), Lexington Realty Trust (NYSE:LXP), and Lexmark International Inc (NYSE:LXK). All of these stocks’ market caps are similar to BGCP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SUM | 26 | 470924 | 4 |
| MDRX | 29 | 552719 | 0 |
| LXP | 16 | 54051 | 3 |
| LXK | 25 | 303638 | -3 |
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $345 million. That figure was $98 million in BGCP’s case. Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) is the most popular stock in this table. On the other hand Lexington Realty Trust (NYSE:LXP) is the least popular one with only 16 bullish hedge fund positions. BGC Partners, Inc. (NASDAQ:BGCP) 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. In this regard MDRX might be a better candidate to consider taking a long position in.
Disclosure: None
