Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track more than 700 prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile gigantic failures like hedge funds’ recent losses in Valeant. Let’s take a closer look at what the funds we track think about BorgWarner Inc. (NYSE:BWA) in this article.
BorgWarner Inc. (NYSE:BWA) shareholders have witnessed an increase in activity from the world’s largest hedge funds in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as The Western Union Company (NYSE:WU), Annaly Capital Management, Inc. (NYSE:NLY), and Affiliated Managers Group, Inc. (NYSE:AMG) to gather more data points.
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In the eyes of most traders, hedge funds are assumed to be underperforming, old investment tools of yesteryear. While there are over an 8000 funds in operation at the moment, Our researchers hone in on the aristocrats of this group, approximately 700 funds. These money managers watch over bulk of the hedge fund industry’s total capital, and by keeping an eye on their unrivaled stock picks, Insider Monkey has uncovered many investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.
Keeping this in mind, let’s take a look at the key action surrounding BorgWarner Inc. (NYSE:BWA).
How have hedgies been trading BorgWarner Inc. (NYSE:BWA)?
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of an 8% from the second quarter. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the largest position in BorgWarner Inc. (NYSE:BWA). According to its latest quarterly filing, the fund has a $67.8 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is GAMCO Investors, led by Mario Gabelli, holding a $36.6 million stake; the fund has 0.2% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise Ian Simm’s Impax Asset Management, Michael R. Weisberg’s Crestwood Capital Management and Jim Simons’s Renaissance Technologies.
As aggregate interest increased, some big names were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, created the biggest position in BorgWarner Inc. (NYSE:BWA), worth approximately $14.2 million at the end of September. Ken Gray and Steve Walsh’s Bryn Mawr Capital also made a $3.3 million investment in the stock during the quarter. The following funds were also among the new BWA investors: John Overdeck and David Siegel’s Two Sigma Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors.
Let’s also examine hedge fund activity in other stocks similar to BorgWarner Inc. (NYSE:BWA). These stocks are The Western Union Company (NYSE:WU), Annaly Capital Management, Inc. (NYSE:NLY), Affiliated Managers Group, Inc. (NYSE:AMG), and HollyFrontier Corp (NYSE:HFC). This group of stocks’ market valuations resemble BWA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WU | 28 | 885467 | -7 |
| NLY | 23 | 267347 | 3 |
| AMG | 34 | 547877 | 7 |
| HFC | 40 | 1023227 | 14 |
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $681 million. That figure was $485 million in BWA’s case. HollyFrontier Corp (NYSE:HFC) is the most popular stock in this table. On the other hand Annaly Capital Management, Inc. (NYSE:NLY) is the least popular one with only 23 bullish hedge fund positions. BorgWarner Inc. (NYSE:BWA) 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. In this regard HFC might be a better candidate to consider a long position.
