It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year (through May 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. 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 Barclays PLC (NYSE:BCS).
Barclays PLC (NYSE:BCS) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of the first quarter of 2019. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Autodesk, Inc. (NASDAQ:ADSK), Moody’s Corporation (NYSE:MCO), and Eaton Corporation plc (NYSE:ETN) to gather more data points.
In the financial world there are tons of tools shareholders have at their disposal to grade publicly traded companies. A pair of the most useful tools are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the top fund managers can outclass the broader indices by a solid margin (see the details here).
Boykin Curry of Eagle Capital
We’re going to take a gander at the latest hedge fund action encompassing Barclays PLC (NYSE:BCS).
Hedge fund activity in Barclays PLC (NYSE:BCS)
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in BCS a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Eagle Capital Management held the most valuable stake in Barclays PLC (NYSE:BCS), which was worth $127.6 million at the end of the first quarter. On the second spot was Segantii Capital which amassed $13.3 million worth of shares. Moreover, Renaissance Technologies, Masters Capital Management, and Citadel Investment Group were also bullish on Barclays PLC (NYSE:BCS), allocating a large percentage of their portfolios to this stock.
Since Barclays PLC (NYSE:BCS) has faced falling interest from the smart money, we can see that there lies a certain “tier” of hedgies that slashed their entire stakes in the third quarter. It’s worth mentioning that David Costen Haley’s HBK Investments dumped the biggest stake of the 700 funds watched by Insider Monkey, valued at close to $3 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also sold off its stock, about $1 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to Barclays PLC (NYSE:BCS). These stocks are Autodesk, Inc. (NASDAQ:ADSK), Moody’s Corporation (NYSE:MCO), Eaton Corporation plc (NYSE:ETN), and Worldpay, Inc. (NYSE:WP). This group of stocks’ market valuations are closest to BCS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADSK | 57 | 3695998 | -2 |
| MCO | 34 | 6446374 | 2 |
| ETN | 39 | 684979 | 9 |
| WP | 75 | 5218167 | 27 |
| Average | 51.25 | 4011380 | 9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51.25 hedge funds with bullish positions and the average amount invested in these stocks was $4011 million. That figure was $161 million in BCS’s case. Worldpay, Inc. (NYSE:WP) is the most popular stock in this table. On the other hand Moody’s Corporation (NYSE:MCO) is the least popular one with only 34 bullish hedge fund positions. Compared to these stocks Barclays PLC (NYSE:BCS) is even less popular than MCO. Hedge funds dodged a bullet by taking a bearish stance towards BCS. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BCS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BCS investors were disappointed as the stock returned -4.4% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
