Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Braskem SA (ADR) (NYSE:BAK) investors should pay attention to an increase in hedge fund interest recently. BAK was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 5 hedge funds in our database with BAK holdings at the end of the previous quarter. At the end of this article we will also compare BAK to other stocks including Owens Corning (NYSE:OC), VimpelCom Ltd (ADR) (NYSE:VIP), and Steel Dynamics, Inc. (NASDAQ:STLD) to get a better sense of its popularity.
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How are hedge funds trading Braskem SA (ADR) (NYSE:BAK)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 60% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in BAK at the beginning of this year. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Jim Simons’ Renaissance Technologies, one of the largest hedge funds in the world, has the number one position in Braskem SA (ADR) (NYSE:BAK), worth close to $33.6 million. On Renaissance Technologies’ heels is Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital holding a $5.2 million position. Other peers with similar optimism comprise Israel Englander’s Millennium Management, Jon Bauer’s Contrarian Capital and Robert B. Gillam’s McKinley Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, key money managers were leading the bulls’ herd. Contrarian Capital created the most valuable position in Braskem SA (ADR) (NYSE:BAK) which had $1.9 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $0.8 million position during the quarter. The following funds were also among the new BAK investors: Mike Vranos’ Ellington and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Braskem SA (ADR) (NYSE:BAK) but similarly valued. These stocks are Owens Corning (NYSE:OC), VimpelCom Ltd (ADR) (NYSE:VIP), Steel Dynamics, Inc. (NASDAQ:STLD), and Leggett & Platt, Inc. (NYSE:LEG). This group of stocks’ market caps match BAK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OC | 35 | 1197532 | 1 |
| VIP | 22 | 253443 | 12 |
| STLD | 33 | 634258 | 2 |
| LEG | 21 | 123384 | 6 |
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $552 million. That figure was $46 million in BAK’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand Leggett & Platt, Inc. (NYSE:LEG) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Braskem SA (ADR) (NYSE:BAK) is even less popular than LEG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
