We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz’s recent General Electric losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Bright Horizons Family Solutions Inc (NYSE:BFAM).
Is Bright Horizons Family Solutions Inc (NYSE:BFAM) a buy right now? Money managers are becoming less confident. The number of long hedge fund positions retreated by 1 lately. Our calculations also showed that BFAM isn’t among the 30 most popular stocks among hedge funds. BFAM was in 16 hedge funds’ portfolios at the end of the third quarter of 2018. There were 17 hedge funds in our database with BFAM positions at the end of the previous quarter.
In the 21st century investor’s toolkit there are several metrics investors have at their disposal to analyze stocks. A pair of the less utilized metrics are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top investment managers can trounce the broader indices by a superb amount (see the details here).
We’re going to go over the new hedge fund action encompassing Bright Horizons Family Solutions Inc (NYSE:BFAM).
How have hedgies been trading Bright Horizons Family Solutions Inc (NYSE:BFAM)?
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in BFAM heading into this year. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the number one position in Bright Horizons Family Solutions Inc (NYSE:BFAM). Select Equity Group has a $275.4 million position in the stock, comprising 2% of its 13F portfolio. Sitting at the No. 2 spot is Laurion Capital Management, managed by Benjamin A. Smith, which holds a $7 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish include Noam Gottesman’s GLG Partners, Leighton Welch’s Welch Capital Partners and Jim Simons’s Renaissance Technologies.
Judging by the fact that Bright Horizons Family Solutions Inc (NYSE:BFAM) has witnessed falling interest from hedge fund managers, it’s easy to see that there is a sect of hedgies who sold off their positions entirely by the end of the third quarter. Intriguingly, Ken Griffin’s Citadel Investment Group dropped the largest position of all the hedgies monitored by Insider Monkey, totaling close to $2 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $0.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Bright Horizons Family Solutions Inc (NYSE:BFAM). We will take a look at Forest City Enterprises, Inc. (NYSE:FCE), Allison Transmission Holdings Inc (NYSE:ALSN), The Stars Group Inc. (NASDAQ:TSG), and Old Republic International Corporation (NYSE:ORI). This group of stocks’ market valuations resemble BFAM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCE | 34 | 1777751 | -9 |
| ALSN | 24 | 1487235 | 1 |
| TSG | 52 | 910861 | -8 |
| ORI | 20 | 433634 | 1 |
| Average | 32.5 | 1152370 | -3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1.15 billion. That figure was $332 million in BFAM’s case. The Stars Group Inc. (NASDAQ:TSG) is the most popular stock in this table. On the other hand Old Republic International Corporation (NYSE:ORI) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Bright Horizons Family Solutions Inc (NYSE:BFAM) is even less popular than ORI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
