Hedge Funds Aren’t Crazy About BlackBerry Limited (BB) Anymore

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of BlackBerry Limited (NYSE:BB) based on that data.

BlackBerry Limited (NYSE:BB) has seen a decrease in hedge fund interest lately. Our calculations also showed that BB isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to check out the latest hedge fund action surrounding BlackBerry Limited (NYSE:BB).

What does smart money think about BlackBerry Limited (NYSE:BB)?

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the fourth quarter of 2019. By comparison, 23 hedge funds held shares or bullish call options in BB a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Among these funds, Fairfax Financial Holdings held the most valuable stake in BlackBerry Limited (NYSE:BB), which was worth $191 million at the end of the third quarter. On the second spot was Iridian Asset Management which amassed $29.6 million worth of shares. Kahn Brothers, D E Shaw, and MFP Investors 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 Fairfax Financial Holdings allocated the biggest weight to BlackBerry Limited (NYSE:BB), around 13.23% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, earmarking 4.4 percent of its 13F equity portfolio to BB.

Judging by the fact that BlackBerry Limited (NYSE:BB) has faced declining sentiment from the smart money, we can see that there was a specific group of hedgies that decided to sell off their full holdings last quarter. It’s worth mentioning that Prem Watsa’s Fairfax Financial Holdings cut the largest position of the “upper crust” of funds monitored by Insider Monkey, worth about $506.4 million in stock. Michael Burry’s fund, Scion Asset Management, also cut its stock, about $5.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as BlackBerry Limited (NYSE:BB) but similarly valued. We will take a look at Tempur Sealy International Inc. (NYSE:TPX), J&J Snack Foods Corp. (NASDAQ:JJSF), Valmont Industries, Inc. (NYSE:VMI), and Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH). This group of stocks’ market caps resemble BB’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $352 million. That figure was $280 million in BB’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 17 bullish hedge fund positions. BlackBerry Limited (NYSE:BB) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on BB as the stock returned 34.9% during the second quarter and outperformed the market by an even larger margin.

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