Is Bruker Corporation (NASDAQ:BRKR) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Bruker Corporation (NASDAQ:BRKR) was in 21 hedge funds’ portfolios at the end of the third quarter of 2019. BRKR shareholders have witnessed a decrease in enthusiasm from smart money recently. There were 27 hedge funds in our database with BRKR holdings at the end of the previous quarter. Our calculations also showed that BRKR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
David Harding of Winton Capital Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the key hedge fund action encompassing Bruker Corporation (NASDAQ:BRKR).
What have hedge funds been doing with Bruker Corporation (NASDAQ:BRKR)?
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in BRKR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Bruker Corporation (NASDAQ:BRKR), with a stake worth $78.8 million reported as of the end of September. Trailing Citadel Investment Group was D E Shaw, which amassed a stake valued at $61.5 million. Arrowstreet Capital, AQR Capital Management, and Winton 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 Sensato Capital Management allocated the biggest weight to Bruker Corporation (NASDAQ:BRKR), around 1.39% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.46 percent of its 13F equity portfolio to BRKR.
Because Bruker Corporation (NASDAQ:BRKR) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there was a specific group of funds that slashed their positions entirely in the third quarter. Interestingly, Renaissance Technologies dropped the largest investment of the 750 funds tracked by Insider Monkey, totaling close to $10.1 million in stock, and Robert B. Gillam’s McKinley Capital Management was right behind this move, as the fund said goodbye to about $5.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 6 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Bruker Corporation (NASDAQ:BRKR) but similarly valued. These stocks are MongoDB, Inc. (NASDAQ:MDB), Xerox Holdings Corporation (NYSE:XRX), EQT Midstream Partners LP (NYSE:EQM), and Logitech International SA (NASDAQ:LOGI). This group of stocks’ market valuations are closest to BRKR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MDB | 29 | 526751 | -5 |
| XRX | 32 | 1169230 | 4 |
| EQM | 11 | 35867 | 3 |
| LOGI | 14 | 213458 | -2 |
| Average | 21.5 | 486327 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $486 million. That figure was $272 million in BRKR’s case. Xerox Holdings Corporation (NYSE:XRX) is the most popular stock in this table. On the other hand EQT Midstream Partners LP (NYSE:EQM) is the least popular one with only 11 bullish hedge fund positions. Bruker Corporation (NASDAQ:BRKR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on BRKR as the stock returned 16.5% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
