We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Broadridge Financial Solutions, Inc. (NYSE:BR) in this article.
Broadridge Financial Solutions, Inc. (NYSE:BR) has seen an increase in hedge fund sentiment lately. BR was in 35 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 31 hedge funds in our database with BR positions at the end of the previous quarter. Our calculations also showed that BR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Sander Gerber of Hudson Bay Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the new hedge fund action regarding Broadridge Financial Solutions, Inc. (NYSE:BR).
How have hedgies been trading Broadridge Financial Solutions, Inc. (NYSE:BR)?
At Q4’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in BR a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, James Parsons’s Junto Capital Management has the number one position in Broadridge Financial Solutions, Inc. (NYSE:BR), worth close to $53.2 million, corresponding to 2.5% of its total 13F portfolio. The second most bullish fund manager is Bristol Gate Capital Partners, led by Peter Simmie, holding a $45 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain Cliff Asness’s AQR Capital Management, Ric Dillon’s Diamond Hill Capital and Usman Waheed’s Strycker View Capital. In terms of the portfolio weights assigned to each position Strycker View Capital allocated the biggest weight to Broadridge Financial Solutions, Inc. (NYSE:BR), around 12.25% of its 13F portfolio. Bristol Gate Capital Partners is also relatively very bullish on the stock, setting aside 4.47 percent of its 13F equity portfolio to BR.
As one would reasonably expect, specific money managers were breaking ground themselves. Sunriver Management, managed by Will Cook, initiated the most valuable position in Broadridge Financial Solutions, Inc. (NYSE:BR). Sunriver Management had $24.9 million invested in the company at the end of the quarter. Sander Gerber’s Hudson Bay Capital Management also initiated a $3.7 million position during the quarter. The following funds were also among the new BR investors: Ken Griffin’s Citadel Investment Group, Benjamin A. Smith’s Laurion Capital Management, and Jaime Sterne’s Skye Global Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Broadridge Financial Solutions, Inc. (NYSE:BR) but similarly valued. These stocks are NVR, Inc. (NYSE:NVR), Phillips 66 Partners LP (NYSE:PSXP), Hologic, Inc. (NASDAQ:HOLX), and Okta, Inc. (NASDAQ:OKTA). All of these stocks’ market caps are similar to BR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVR | 30 | 1060404 | -8 |
| PSXP | 5 | 22709 | 0 |
| HOLX | 41 | 1500424 | 5 |
| OKTA | 39 | 996171 | -13 |
| Average | 28.75 | 894927 | -4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $895 million. That figure was $343 million in BR’s case. Hologic, Inc. (NASDAQ:HOLX) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 5 bullish hedge fund positions. Broadridge Financial Solutions, Inc. (NYSE:BR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on BR as the stock returned -18.9% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
