Hedge Funds Have Never Been This Bullish On The Blackstone Group L.P. (BX)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of The Blackstone Group L.P. (NYSE:BX).

The Blackstone Group L.P. (NYSE:BX) was in 49 hedge funds’ portfolios at the end of March. BX shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. There were 47 hedge funds in our database with BX holdings at the end of the previous quarter. Our calculations also showed that BX 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.

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’ 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 44 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.

John Armitage of Egerton Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. 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. Keeping this in mind let’s take a look at the key hedge fund action regarding The Blackstone Group L.P. (NYSE:BX).

What does smart money think about The Blackstone Group L.P. (NYSE:BX)?

At the end of the first quarter, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the fourth quarter of 2019. By comparison, 34 hedge funds held shares or bullish call options in BX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Southport Management, managed by Jonathan Dawson, holds the most valuable position in The Blackstone Group L.P. (NYSE:BX). Southport Management has a $478.5 million position in the stock, comprising 5.3% of its 13F portfolio. Sitting at the No. 2 spot is John Armitage of Egerton Capital Limited, with a $235.9 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism consist of Mick Hellman’s HMI Capital, Robert Joseph Caruso’s Select Equity Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position HMI Capital allocated the biggest weight to The Blackstone Group L.P. (NYSE:BX), around 10.04% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, setting aside 9.11 percent of its 13F equity portfolio to BX.

With a general bullishness amongst the heavyweights, specific money managers have jumped into The Blackstone Group L.P. (NYSE:BX) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in The Blackstone Group L.P. (NYSE:BX). Citadel Investment Group had $48.4 million invested in the company at the end of the quarter. Bill Ackman’s Pershing Square also made a $25 million investment in the stock during the quarter. The following funds were also among the new BX investors: Lee Ainslie’s Maverick Capital, Farallon Capital, and Ryan Caldwell’s Chiron Investment Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The Blackstone Group L.P. (NYSE:BX) but similarly valued. These stocks are ServiceNow Inc (NYSE:NOW), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Equinix Inc (NASDAQ:EQIX), and Advanced Micro Devices, Inc. (NASDAQ:AMD). This group of stocks’ market valuations are similar to BX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 61 hedge funds with bullish positions and the average amount invested in these stocks was $2215 million. That figure was $1523 million in BX’s case. ServiceNow Inc (NYSE:NOW) is the most popular stock in this table. On the other hand Regeneron Pharmaceuticals Inc (NASDAQ:REGN) is the least popular one with only 42 bullish hedge fund positions. The Blackstone Group L.P. (NYSE:BX) 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 7.9% in 2020 through May 22nd but beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on BX, though not to the same extent, as the stock returned 19.3% during the second quarter and outperformed the market.

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