It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you’d fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of 4 percentage points during the first 9 months of 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Compania de Minas Buenaventura S.A.A. (NYSE:BVN).
Hedge fund interest in Compania de Minas Buenaventura S.A.A. (NYSE:BVN) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Wyndham Destinations, Inc. (NYSE:WYND), Performance Food Group Company (NYSE:PFGC), and Murphy Oil Corporation (NYSE:MUR) to gather more data points. Our calculations also showed that BVN isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the latest hedge fund action surrounding Compania de Minas Buenaventura S.A.A. (NYSE:BVN).
How have hedgies been trading Compania de Minas Buenaventura S.A.A. (NYSE:BVN)?
Heading into the third quarter of 2019, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in BVN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Halpert’s Prince Street Capital Management has the number one position in Compania de Minas Buenaventura S.A.A. (NYSE:BVN), worth close to $6.2 million, corresponding to 2.9% of its total 13F portfolio. The second largest stake is held by Eric Sprott of Sprott Asset Management, with a $3.3 million position; 0.8% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and David Harding’s Winton Capital Management.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: PEAK6 Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Citadel Investment Group).
Let’s go over hedge fund activity in other stocks similar to Compania de Minas Buenaventura S.A.A. (NYSE:BVN). These stocks are Wyndham Destinations, Inc. (NYSE:WYND), Performance Food Group Company (NYSE:PFGC), Murphy Oil Corporation (NYSE:MUR), and Janus Henderson Group plc (NYSE:JHG). All of these stocks’ market caps are closest to BVN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WYND | 22 | 456955 | -3 |
| PFGC | 19 | 142121 | -6 |
| MUR | 18 | 121679 | -2 |
| JHG | 15 | 198482 | 3 |
| Average | 18.5 | 229809 | -2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $230 million. That figure was $16 million in BVN’s case. Wyndham Destinations, Inc. (NYSE:WYND) is the most popular stock in this table. On the other hand Janus Henderson Group plc (NYSE:JHG) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Compania de Minas Buenaventura S.A.A. (NYSE:BVN) is even less popular than JHG. Hedge funds dodged a bullet by taking a bearish stance towards BVN. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BVN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BVN investors were disappointed as the stock returned -8.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
