Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients’ money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
BRP Inc. (NASDAQ:DOOO) was in 11 hedge funds’ portfolios at the end of December. DOOO has experienced a decrease in hedge fund sentiment lately. There were 16 hedge funds in our database with DOOO holdings at the end of the previous quarter. Our calculations also showed that dooo isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
Let’s view the fresh hedge fund action surrounding BRP Inc. (NASDAQ:DOOO).
How are hedge funds trading BRP Inc. (NASDAQ:DOOO)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in DOOO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in BRP Inc. (NASDAQ:DOOO), which was worth $36.4 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $23.1 million worth of shares. Moreover, GLG Partners, Arrowstreet Capital, and Islet Management were also bullish on BRP Inc. (NASDAQ:DOOO), allocating a large percentage of their portfolios to this stock.
Since BRP Inc. (NASDAQ:DOOO) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedgies who were dropping their full holdings by the end of the third quarter. Intriguingly, Clint Carlson’s Carlson Capital sold off the biggest stake of all the hedgies followed by Insider Monkey, valued at an estimated $6.6 million in stock, and David Costen Haley’s HBK Investments was right behind this move, as the fund dumped about $4.7 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 5 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to BRP Inc. (NASDAQ:DOOO). We will take a look at FTI Consulting, Inc. (NYSE:FCN), Hilton Grand Vacations Inc. (NYSE:HGV), Axon Enterprise, Inc. (NASDAQ:AAXN), and Ryder System, Inc. (NYSE:R). This group of stocks’ market values are similar to DOOO’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCN | 16 | 116498 | -2 |
| HGV | 28 | 705198 | 1 |
| AAXN | 16 | 228557 | 0 |
| R | 19 | 372942 | -4 |
| Average | 19.75 | 355799 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $356 million. That figure was $122 million in DOOO’s case. Hilton Grand Vacations Inc. (NYSE:HGV) is the most popular stock in this table. On the other hand FTI Consulting, Inc. (NYSE:FCN) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks BRP Inc. (NASDAQ:DOOO) is even less popular than FCN. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on DOOO, though not to the same extent, as the stock returned 20.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.