How do you pick the next stock to invest in? One way would be to spend hours 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 Barnes Group Inc. (NYSE:B).
Is Barnes Group Inc. (NYSE:B) the right pick for your portfolio? The smart money is getting more bullish. The number of long hedge fund bets moved up by 1 recently. Our calculations also showed that B isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s take a look at the recent hedge fund action regarding Barnes Group Inc. (NYSE:B).
Hedge fund activity in Barnes Group Inc. (NYSE:B)
Heading into the first quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards B over the last 14 quarters. 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, Millennium Management was the largest shareholder of Barnes Group Inc. (NYSE:B), with a stake worth $11.8 million reported as of the end of September. Trailing Millennium Management was Fisher Asset Management, which amassed a stake valued at $4.9 million. GLG Partners, D E Shaw, and Maverick Capital were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, created the largest position in Barnes Group Inc. (NYSE:B). Renaissance Technologies had $2.3 million invested in the company at the end of the quarter. Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital also initiated a $0.2 million position during the quarter.
Let’s now review hedge fund activity in other stocks similar to Barnes Group Inc. (NYSE:B). These stocks are Orbotech Ltd. (NASDAQ:ORBK), Thor Industries, Inc. (NYSE:THO), UniFirst Corp (NYSE:UNF), and Cabot Microelectronics Corporation (NASDAQ:CCMP). This group of stocks’ market valuations are closest to B’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ORBK | 32 | 700155 | 5 |
| THO | 22 | 140201 | -6 |
| UNF | 14 | 152652 | -2 |
| CCMP | 20 | 280850 | 1 |
| Average | 22 | 318465 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $318 million. That figure was $32 million in B’s case. Orbotech Ltd. (NASDAQ:ORBK) is the most popular stock in this table. On the other hand UniFirst Corp (NYSE:UNF) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Barnes Group Inc. (NYSE:B) is even less popular than UNF. Hedge funds dodged a bullet by taking a bearish stance towards B. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately B wasn’t nearly as popular as these 15 stock (hedge fund sentiment was very bearish); B investors were disappointed as the stock returned -0.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
