Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Broadridge Financial Solutions, Inc. (NYSE:BR) to find out whether there were any major changes in hedge funds’ views.
Is BR a good stock to buy? Money managers were getting more optimistic. The number of bullish hedge fund positions moved up by 9 in recent months. Broadridge Financial Solutions, Inc. (NYSE:BR) was in 33 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 35. Our calculations also showed that BR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 24 hedge funds in our database with BR holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital 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 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 glance at the new hedge fund action regarding Broadridge Financial Solutions, Inc. (NYSE:BR).
Do Hedge Funds Think BR Is A Good Stock To Buy Now?
At third quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in BR a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Bristol Gate Capital Partners held the most valuable stake in Broadridge Financial Solutions, Inc. (NYSE:BR), which was worth $58.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $34.8 million worth of shares. Diamond Hill Capital, Arrowstreet Capital, and AQR Capital Management 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 Bristol Gate Capital Partners allocated the biggest weight to Broadridge Financial Solutions, Inc. (NYSE:BR), around 4.4% of its 13F portfolio. Lunia Capital is also relatively very bullish on the stock, dishing out 3.13 percent of its 13F equity portfolio to BR.
Consequently, some big names were breaking ground themselves. Renaissance Technologies, established the most valuable position in Broadridge Financial Solutions, Inc. (NYSE:BR). Renaissance Technologies had $34.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $15.3 million position during the quarter. The other funds with brand new BR positions are Dmitry Balyasny’s Balyasny Asset Management, Paul Tudor Jones’s Tudor Investment Corp, and D. E. Shaw’s D E Shaw.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Broadridge Financial Solutions, Inc. (NYSE:BR) but similarly valued. We will take a look at Fifth Third Bancorp (NASDAQ:FITB), Expeditors International of Washington (NASDAQ:EXPD), Ryanair Holdings plc (NASDAQ:RYAAY), Xylem Inc (NYSE:XYL), NVR, Inc. (NYSE:NVR), CarMax Inc (NYSE:KMX), and Altice USA, Inc. (NYSE:ATUS). This group of stocks’ market caps are closest to BR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FITB | 30 | 358412 | -2 |
| EXPD | 31 | 528714 | -2 |
| RYAAY | 16 | 659788 | -5 |
| XYL | 21 | 592977 | -1 |
| NVR | 42 | 1141650 | 3 |
| KMX | 54 | 1449835 | 8 |
| ATUS | 62 | 3526439 | 5 |
| Average | 36.6 | 1179688 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1180 million. That figure was $244 million in BR’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 16 bullish hedge fund positions. Broadridge Financial Solutions, Inc. (NYSE:BR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BR is 56.8. 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. 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 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. A small number of hedge funds were also right about betting on BR as the stock returned 17% since the end of the third quarter (through 12/18) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
