How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Brookfield Asset Management Inc. (NYSE:BAM).
Is BAM a good stock to buy? Brookfield Asset Management Inc. (NYSE:BAM) investors should pay attention to an increase in enthusiasm from smart money lately. Brookfield Asset Management Inc. (NYSE:BAM) was in 35 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 37. There were 33 hedge funds in our database with BAM holdings at the end of June. Our calculations also showed that BAM isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the financial world there are several gauges market participants employ to value stocks. A duo of the less known gauges are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the top money managers can trounce the market by a solid margin (see the details here).
Charles Akre of Akre Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to go over the new hedge fund action encompassing Brookfield Asset Management Inc. (NYSE:BAM).
Do Hedge Funds Think BAM Is A Good Stock To Buy Now?
At third quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 32 hedge funds with a bullish position in BAM 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.
More specifically, Akre Capital Management was the largest shareholder of Brookfield Asset Management Inc. (NYSE:BAM), with a stake worth $447.7 million reported as of the end of September. Trailing Akre Capital Management was Markel Gayner Asset Management, which amassed a stake valued at $287.6 million. Citadel Investment Group, Horizon Asset Management, and Renaissance Technologies 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 Greenlea Lane Capital allocated the biggest weight to Brookfield Asset Management Inc. (NYSE:BAM), around 11.89% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, designating 6.1 percent of its 13F equity portfolio to BAM.
Consequently, specific money managers were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, created the most valuable position in Brookfield Asset Management Inc. (NYSE:BAM). Alyeska Investment Group had $5.6 million invested in the company at the end of the quarter. Bryan Hinmon’s Motley Fool Asset Management also initiated a $5 million position during the quarter. The following funds were also among the new BAM investors: Usman Waheed’s Strycker View Capital, Michael Gelband’s ExodusPoint Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Brookfield Asset Management Inc. (NYSE:BAM) but similarly valued. We will take a look at Edwards Lifesciences Corporation (NYSE:EW), China Petroleum & Chemical Corp (NYSE:SNP), Lam Research Corporation (NASDAQ:LRCX), Waste Management, Inc. (NYSE:WM), Aon plc (NYSE:AON), The Charles Schwab Corporation (NYSE:SCHW), and The PNC Financial Services Group Inc. (NYSE:PNC). This group of stocks’ market caps are similar to BAM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EW | 46 | 1122952 | 1 |
| SNP | 8 | 168584 | -2 |
| LRCX | 55 | 2247749 | -7 |
| WM | 38 | 2845066 | -1 |
| AON | 52 | 5410949 | -5 |
| SCHW | 53 | 3280246 | -18 |
| PNC | 37 | 740197 | -15 |
| Average | 41.3 | 2259392 | -6.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.3 hedge funds with bullish positions and the average amount invested in these stocks was $2259 million. That figure was $1081 million in BAM’s case. Lam Research Corporation (NASDAQ:LRCX) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 8 bullish hedge fund positions. Brookfield Asset Management Inc. (NYSE:BAM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BAM is 64.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on BAM as the stock returned 22.1% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
