In this article we will check out the progression of hedge fund sentiment towards Brookfield Asset Management Inc. (NYSE:BAM) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is BAM stock a buy or sell? Brookfield Asset Management Inc. (NYSE:BAM) has seen an increase in hedge fund interest in recent months. Brookfield Asset Management Inc. (NYSE:BAM) was in 38 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 35 hedge funds in our database with BAM holdings at the end of September. Our calculations also showed that BAM isn’t among the 30 most popular stocks among hedge funds (click for Q4 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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.
Tom Gayner of Markel Gayner Asset 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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 let’s take a look at the recent hedge fund action surrounding Brookfield Asset Management Inc. (NYSE:BAM).
Do Hedge Funds Think BAM Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in BAM over the last 22 quarters. So, let’s see 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 $538.2 million reported as of the end of December. Trailing Akre Capital Management was Markel Gayner Asset Management, which amassed a stake valued at $359.3 million. Citadel Investment Group, Horizon Asset Management, and Greenlea Lane Capital 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 15.65% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, setting aside 5.83 percent of its 13F equity portfolio to BAM.
As industrywide interest jumped, some big names have been driving this bullishness. Echo Street Capital Management, managed by Greg Poole, assembled the largest position in Brookfield Asset Management Inc. (NYSE:BAM). Echo Street Capital Management had $15.9 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $10.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, James Dinan’s York Capital Management, and Sander Gerber’s Hudson Bay Capital Management.
Let’s also examine 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 Ecolab Inc. (NYSE:ECL), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), Dominion Energy Inc. (NYSE:D), Air Products & Chemicals, Inc. (NYSE:APD), Norfolk Southern Corp. (NYSE:NSC), Spotify Technology S.A. (NYSE:SPOT), and General Motors Company (NYSE:GM). This group of stocks’ market valuations are closest to BAM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ECL | 45 | 2449625 | -7 |
| VRTX | 53 | 3108859 | -2 |
| D | 47 | 1506824 | 10 |
| APD | 50 | 1282433 | 1 |
| NSC | 44 | 783686 | -3 |
| SPOT | 48 | 2688846 | 4 |
| GM | 70 | 6332871 | 10 |
| Average | 51 | 2593306 | 1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $2593 million. That figure was $1331 million in BAM’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Norfolk Southern Corp. (NYSE:NSC) is the least popular one with only 44 bullish hedge fund positions. Compared to these stocks Brookfield Asset Management Inc. (NYSE:BAM) is even less popular than NSC. Our overall hedge fund sentiment score for BAM is 38. 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. Hedge funds clearly dropped the ball on BAM as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. A small number of hedge funds were also right about betting on BAM as the stock returned 9.7% since Q4 (through March 19th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
