We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Bright Horizons Family Solutions Inc (NYSE:BFAM) and determine whether hedge funds skillfully traded this stock.
Bright Horizons Family Solutions Inc (NYSE:BFAM) investors should be aware of an increase in support from the world’s most elite money managers lately. Bright Horizons Family Solutions Inc (NYSE:BFAM) was in 30 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. There were 27 hedge funds in our database with BFAM holdings at the end of March. Our calculations also showed that BFAM 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.
In the 21st century investor’s toolkit there are a lot of formulas market participants use to grade publicly traded companies. A pair of the most under-the-radar formulas are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the elite money managers can outperform the market by a superb margin (see the details here).
Kris Jenner of Rock Springs Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let’s analyze the recent hedge fund action surrounding Bright Horizons Family Solutions Inc (NYSE:BFAM).
Hedge fund activity in Bright Horizons Family Solutions Inc (NYSE:BFAM)
At Q2’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BFAM over the last 20 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Bright Horizons Family Solutions Inc (NYSE:BFAM) was held by D1 Capital Partners, which reported holding $68.3 million worth of stock at the end of September. It was followed by D E Shaw with a $21.7 million position. Other investors bullish on the company included Oribel Capital Management, Arrowstreet Capital, and Osterweis Capital Management. In terms of the portfolio weights assigned to each position Dendur Capital allocated the biggest weight to Bright Horizons Family Solutions Inc (NYSE:BFAM), around 3.08% of its 13F portfolio. Oribel Capital Management is also relatively very bullish on the stock, designating 1.24 percent of its 13F equity portfolio to BFAM.
As one would reasonably expect, some big names were leading the bulls’ herd. D1 Capital Partners, managed by Daniel Sundheim, created the most valuable position in Bright Horizons Family Solutions Inc (NYSE:BFAM). D1 Capital Partners had $68.3 million invested in the company at the end of the quarter. Mikal Patel’s Oribel Capital Management also initiated a $15.3 million position during the quarter. The other funds with new positions in the stock are John Osterweis’s Osterweis Capital Management, Kris Jenner, Gordon Bussard, Graham McPhail’s Rock Springs Capital Management, and Ken Griffin’s Citadel Investment Group.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Bright Horizons Family Solutions Inc (NYSE:BFAM) but similarly valued. We will take a look at Huntington Ingalls Industries Inc (NYSE:HII), Universal Display Corporation (NASDAQ:OLED), XPO Logistics Inc (NYSE:XPO), News Corp (NASDAQ:NWS), The New York Times Company (NYSE:NYT), Aspen Technology, Inc. (NASDAQ:AZPN), and Alleghany Corporation (NYSE:Y). All of these stocks’ market caps are closest to BFAM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HII | 30 | 272167 | 9 |
| OLED | 25 | 216895 | 1 |
| XPO | 40 | 2294370 | 4 |
| NWS | 16 | 32230 | 3 |
| NYT | 42 | 1853275 | 9 |
| AZPN | 28 | 878045 | 8 |
| Y | 31 | 270939 | 6 |
| Average | 30.3 | 831132 | 5.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $831 million. That figure was $217 million in BFAM’s case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 16 bullish hedge fund positions. Bright Horizons Family Solutions Inc (NYSE:BFAM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BFAM is 61.4. 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 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. A small number of hedge funds were also right about betting on BFAM as the stock returned 16.6% since the end of June (through September 14th) and outperformed the market by an even larger margin.
Follow Bright Horizons Family Solutions Inc. (NYSE:BFAM)
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Disclosure: None. This article was originally published at Insider Monkey.
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