Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Bloomin’ Brands Inc (NASDAQ:BLMN).
Hedge fund interest in Bloomin’ Brands Inc (NASDAQ:BLMN) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare BLMN to other stocks including Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Magellan Health Inc (NASDAQ:MGLN), and Atkore International Group Inc. (NYSE:ATKR) to get a better sense of its popularity.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Barry Rosenstein of JANA Partners
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the new hedge fund action encompassing Bloomin’ Brands Inc (NASDAQ:BLMN).
What have hedge funds been doing with Bloomin’ Brands Inc (NASDAQ:BLMN)?
Heading into the first quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in BLMN over the last 18 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, JANA Partners held the most valuable stake in Bloomin’ Brands Inc (NASDAQ:BLMN), which was worth $141.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $18.4 million worth of shares. GLG Partners, D E Shaw, and Skylands 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 JANA Partners allocated the biggest weight to Bloomin’ Brands Inc (NASDAQ:BLMN), around 11.77% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, designating 1.53 percent of its 13F equity portfolio to BLMN.
Seeing as Bloomin’ Brands Inc (NASDAQ:BLMN) has experienced a decline in interest from hedge fund managers, it’s safe to say that there was a specific group of funds who were dropping their full holdings by the end of the third quarter. At the top of the heap, Kenneth Squire’s 13D Management dropped the biggest position of the “upper crust” of funds watched by Insider Monkey, comprising close to $13.8 million in stock. Steve Cohen’s fund, Point72 Asset Management, also cut its stock, about $8.9 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Bloomin’ Brands Inc (NASDAQ:BLMN) but similarly valued. These stocks are Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), Magellan Health Inc (NASDAQ:MGLN), Atkore International Group Inc. (NYSE:ATKR), and Taubman Centers, Inc. (NYSE:TCO). This group of stocks’ market valuations are closest to BLMN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KTOS | 16 | 39987 | -6 |
| MGLN | 19 | 381495 | 1 |
| ATKR | 23 | 183994 | 2 |
| TCO | 26 | 128381 | 2 |
| Average | 21 | 183464 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $221 million in BLMN’s case. Taubman Centers, Inc. (NYSE:TCO) is the most popular stock in this table. On the other hand Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS) is the least popular one with only 16 bullish hedge fund positions. Bloomin’ Brands Inc (NASDAQ:BLMN) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately BLMN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BLMN investors were disappointed as the stock returned -68.3% during the same time period 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 most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
