Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
BP plc (ADR) (NYSE:BP) was in 35 hedge funds’ portfolios at the end of the third quarter of 2015. BP has seen an increase in activity from the world’s largest hedge funds lately. There were 33 hedge funds in our database with BP holdings at the end of the previous quarter. 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 Mastercard Inc (NYSE:MA), Bristol Myers Squibb Co. (NYSE:BMY), and China Life Insurance Company Ltd. (ADR) (NYSE:LFC) to gather more data points.
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Now, we’re going to take a glance at the latest action regarding BP plc (ADR) (NYSE:BP).
How have hedgies been trading BP plc (ADR) (NYSE:BP)?
At Q3’s end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Pzena Investment Management, managed by Richard S. Pzena, holds the biggest position in BP plc (ADR) (NYSE:BP). Pzena Investment Management has an $297.5 million position in the stock, comprising 1.9% of its 13F portfolio. The second most bullish fund manager is Bill & Melinda Gates Foundation Trust, managed by Michael Larson, which holds an $187.5 million position; 1.1% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish contain Israel Englander’s Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Israel Englander’s Millennium Management.
As aggregate interest increased, key hedge funds have jumped into BP plc (ADR) (NYSE:BP) headfirst. Millennium Management, managed by Israel Englander, assembled the most outsized position in BP plc (ADR) (NYSE:BP). Millennium Management had $117 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made an $64.7 million investment in the stock during the quarter. The following funds were also among the new BP investors: Peter Muller’s PDT Partners, David Costen Haley’s HBK Investments, and John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as BP plc (ADR) (NYSE:BP) but similarly valued. We will take a look at Mastercard Inc (NYSE:MA), Bristol Myers Squibb Co. (NYSE:BMY), China Life Insurance Company Ltd. (ADR) (NYSE:LFC), and Medtronic PLC (NYSE:MDT). This group of stocks’ market caps are closest to BP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MA | 76 | 6652043 | 1 |
| BMY | 62 | 2524973 | 14 |
| LFC | 9 | 103883 | -6 |
| MDT | 58 | 2051269 | -5 |
As you can see these stocks had an average of 51.25 hedge funds with bullish positions and the average amount invested in these stocks was $2,833 million. That figure was $968 million in BP’s case. Mastercard Inc (NYSE:MA) is the most popular stock in this table. On the other hand China Life Insurance Company Ltd. (ADR) (NYSE:LFC) is the least popular one with only 9 bullish hedge fund positions. BP plc (ADR) (NYSE:BP) 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 MA might be a better candidate to consider a long position.
