We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Brigham Minerals, Inc. (NYSE:MNRL).
Is Brigham Minerals, Inc. (NYSE:MNRL) the right pick for your portfolio? Investors who are in the know are becoming hopeful. The number of bullish hedge fund bets inched up by 15 lately. Our calculations also showed that MNRL isn’t among the 30 most popular stocks among hedge funds (see the video below).
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the fresh hedge fund action surrounding Brigham Minerals, Inc. (NYSE:MNRL).
What have hedge funds been doing with Brigham Minerals, Inc. (NYSE:MNRL)?
At Q2’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15 from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MNRL over the last 16 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Encompass Capital Advisors was the largest shareholder of Brigham Minerals, Inc. (NYSE:MNRL), with a stake worth $13.3 million reported as of the end of March. Trailing Encompass Capital Advisors was Adage Capital Management, which amassed a stake valued at $11.7 million. Soros Fund Management, Millennium Management, and Portolan Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, some big names have jumped into Brigham Minerals, Inc. (NYSE:MNRL) headfirst. Encompass Capital Advisors, managed by Todd J. Kantor, created the most valuable position in Brigham Minerals, Inc. (NYSE:MNRL). Encompass Capital Advisors had $13.3 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $11.7 million investment in the stock during the quarter. The other funds with new positions in the stock are George Soros’s Soros Fund Management, Israel Englander’s Millennium Management, and George McCabe’s Portolan Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Brigham Minerals, Inc. (NYSE:MNRL) but similarly valued. We will take a look at Office Depot Inc (NASDAQ:ODP), Heritage Financial Corporation (NASDAQ:HFWA), Codexis, Inc. (NASDAQ:CDXS), and Matthews International Corp (NASDAQ:MATW). This group of stocks’ market values are similar to MNRL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ODP | 20 | 62932 | -2 |
| HFWA | 9 | 46205 | 2 |
| CDXS | 12 | 305243 | 1 |
| MATW | 13 | 40498 | 1 |
| Average | 13.5 | 113720 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $114 million. That figure was $79 million in MNRL’s case. Office Depot Inc (NASDAQ:ODP) is the most popular stock in this table. On the other hand Heritage Financial Corporation (NASDAQ:HFWA) is the least popular one with only 9 bullish hedge fund positions. Brigham Minerals, Inc. (NYSE:MNRL) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MNRL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MNRL were disappointed as the stock returned -5.8% during the third quarter 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.