The equity market returns were very disappointing in the third quarter, “thanks” to the slowdown of China’s economy and the weaker-than-expected U.S. economic data. It was not entirely clear whether the broader market sell-off made U.S. equity valuations undervalued, but it definitely made them more attractive. It is worth mentioning that Russell 2000 ETF (IWM) underperformed the broad-market S&P 500 ETF by more than 14 percentage points during the period of June 25, 2015 through October 30, 2015. This clearly points to the fact that most investors, including hedge fund firms and institutional investors, heavily cut their exposure to high-potential (but seemingly riskier) small-cap stocks during the bloody third quarter. So let’s take a glance at the smart money sentiment towards Brunswick Corporation (NYSE:BC) and see how it was affected.
Brunswick Corporation was in 31 hedge funds’ portfolios at the end of September. BC has experienced an increase in hedge fund sentiment in recent months. There were 28 hedge funds in our database with BC 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 Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH), Penske Automotive Group, Inc. (NYSE:PAG), and Brown & Brown, Inc. (NYSE:BRO) to gather more data points.
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If you’d ask most investors, hedge funds are assumed to be unimportant, old financial tools of years past. While there are greater than 8000 funds in operation at present, Our researchers look at the crème de la crème of this group, around 700 funds. These hedge fund managers shepherd most of all hedge funds’ total asset base, and by following their matchless picks, Insider Monkey has unsheathed several investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Now, let’s take a peek at the recent action regarding Brunswick Corporation (NYSE:BC).
What have hedge funds been doing with Brunswick Corporation (NYSE:BC)?
At Q3’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Mariko Gordon’s Daruma Asset Management has the biggest position in Brunswick Corporation (NYSE:BC), worth close to $62.6 million, corresponding to 3.8% of its total 13F portfolio. The second most bullish fund manager is Israel Englander of Millennium Management, with a $53.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish contain Ken Griffin’s Citadel Investment Group and Eric Bannasch’s Cadian Capital.
As aggregate interest increased, specific money managers were breaking ground themselves. Gotham Asset Management, managed by Joel Greenblatt, established the biggest position in Brunswick Corporation (NYSE:BC). Gotham Asset Management had $44.6 million invested in the company at the end of the quarter. Rob Citrone’s Discovery Capital Management also made a $7.9 million investment in the stock during the quarter. The other funds with brand new BC positions are Neil Chriss’s Hutchin Hill Capital 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 Brunswick Corporation (NYSE:BC) but similarly valued. These stocks are Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH), Penske Automotive Group, Inc. (NYSE:PAG), Brown & Brown, Inc. (NYSE:BRO), and GameStop Corp. (NYSE:GME). All of these stocks’ market caps are closest to BC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CQH | 12 | 439535 | 0 |
| PAG | 19 | 124363 | 5 |
| BRO | 17 | 497156 | -1 |
| GME | 31 | 482560 | 5 |
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $322 million in BC’s case. GameStop Corp. (NYSE:GME) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP Holdings LLC (NYSEMKT:CQH) is the least popular one with only 12 bullish hedge fund positions. Brunswick Corporation (NYSE:BC) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GME might be a better candidate to consider a long position.
