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 (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Bruker Corporation (NASDAQ:BRKR) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Bruker Corporation (NASDAQ:BRKR) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. BRKR was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 22 hedge funds in our database with BRKR positions at the end of the previous quarter. Our calculations also showed that BRKR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article 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.
Philippe Laffont of Coatue Management
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 we’re going to go over the new hedge fund action encompassing Bruker Corporation (NASDAQ:BRKR).
Hedge fund activity in Bruker Corporation (NASDAQ:BRKR)
Heading into the first quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BRKR over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Bruker Corporation (NASDAQ:BRKR), with a stake worth $72.8 million reported as of the end of September. Trailing D E Shaw was Citadel Investment Group, which amassed a stake valued at $57.8 million. Arrowstreet Capital, GLG Partners, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position McKinley Capital Management allocated the biggest weight to Bruker Corporation (NASDAQ:BRKR), around 0.31% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.3 percent of its 13F equity portfolio to BRKR.
Now, specific money managers have been driving this bullishness. McKinley Capital Management, managed by Robert B. Gillam, established the largest position in Bruker Corporation (NASDAQ:BRKR). McKinley Capital Management had $4.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $1.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Michael Gelband’s ExodusPoint Capital, and Philippe Laffont’s Coatue Management.
Let’s check out hedge fund activity in other stocks similar to Bruker Corporation (NASDAQ:BRKR). We will take a look at GDS Holdings Limited (NASDAQ:GDS), A. O. Smith Corporation (NYSE:AOS), Albemarle Corporation (NYSE:ALB), and Monolithic Power Systems, Inc. (NASDAQ:MPWR). This group of stocks’ market values are closest to BRKR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GDS | 34 | 1466278 | 2 |
| AOS | 26 | 396644 | 3 |
| ALB | 23 | 116420 | 5 |
| MPWR | 27 | 325420 | 1 |
| Average | 27.5 | 576191 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $576 million. That figure was $262 million in BRKR’s case. GDS Holdings Limited (NASDAQ:GDS) is the most popular stock in this table. On the other hand Albemarle Corporation (NYSE:ALB) is the least popular one with only 23 bullish hedge fund positions. Bruker Corporation (NASDAQ:BRKR) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 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 beat the market by 3.2 percentage points. Unfortunately BRKR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BRKR investors were disappointed as the stock returned -37.4% during the same time period 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 most of these stocks already outperformed the market in Q1.
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.
