As we already know from media reports and hedge fund investor letters, many hedge funds lost money in the third quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with healthcare among them. Nevertheless, most investors decided to stick to their bullish theses and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about Brown-Forman Corporation (NYSE:BF-B) in this article.
Is Brown-Forman a good stock to buy? The stock is one of the top performers this and experienced a nearly 15% correction in August. We were wondering whether hedge funds saw this as a buying opportunity and bought the shares. Latests 13F filings show that this was indeed the case. BF-B was in 23 hedge funds’ portfolios at the end of September. There were 20 hedge funds in our database with BF-B positions at the end of the previous quarter. This is a positive sign but we will also compare BF-B to other similarly valued stocks including Incyte Corporation (NASDAQ:INCY), Sirius XM Holdings Inc (NASDAQ:SIRI), and KKR & Co. L.P. (NYSE:KKR) to get a better sense of its popularity.
Follow Brown Forman Corp (NYSE:BFA, BFB)
Follow Brown Forman Corp (NYSE:BFA, BFB)
At the moment there are several formulas stock traders employ to value stocks. Some of the most under-the-radar formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outperform their index-focused peers by a healthy margin (see the details here).
Keeping this in mind, let’s view the key action regarding Brown-Forman Corporation (NYSE:BF-B).
Hedge fund activity in Brown-Forman Corporation (NYSE:BF-B)
At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Tom Russo’s Gardner Russo & Gardner has the most valuable position in Brown-Forman Corporation (NYSE:BF-B), worth close to $277.8 million, amounting to 2.5% of its total 13F portfolio. Sitting at the No. 2 spot is GAMCO Investors, led by Mario Gabelli, holding a $88.7 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other peers that hold long positions include billionaire Richard Chilton’s Chilton Investment Company, and Tom Gayner’s Markel Gayner Asset Management.
Consequently, key hedge funds were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, initiated the biggest position in Brown-Forman. Renaissance Technologies had $2.3 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $1 million position during the quarter. The following funds were also among the new BF-B investors: Matthew Tewksbury’s Stevens Capital Management, Greg Poole’s Echo Street Capital Management, and Ray Dalio’s Bridgewater Associates.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Brown-Forman but similarly valued. We will take a look at Incyte Corporation (NASDAQ:INCY), Sirius XM Holdings Inc (NASDAQ:SIRI), KKR & Co. L.P. (NYSE:KKR), and Mylan Inc. (NASDAQ:MYL). All of these stocks’ market caps are similar to BF.A’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INCY | 40 | 3233575 | 5 |
| SIRI | 35 | 1398167 | 3 |
| KKR | 30 | 581377 | 0 |
| MYL | 74 | 2843316 | -18 |
As you can see these stocks had an average of 44.75 hedge funds with bullish positions and the average amount invested in these stocks was $2014 million. That figure was $621 million in BF-B’s case. Mylan Inc. (NASDAQ:MYL) is the most popular stock in this table. On the other hand KKR & Co. L.P. (NYSE:KKR) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Brown-Forman Corporation (NYSE:BF-B) is even less popular than KKR. 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.
