Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings in a stock like The Blackstone Group L.P. (NYSE:BX).
Hedge fund interest in The Blackstone Group L.P. (NYSE:BX) 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 Automatic Data Processing (NASDAQ:ADP), American Tower Corp (NYSE:AMT), and Deutsche Bank AG (USA) (NYSE:DB) to gather more data points.
Follow Blackstone Inc. (NYSE:BX)
Follow Blackstone Inc. (NYSE:BX)
According to most market participants, hedge funds are perceived as underperforming, old financial tools of yesteryear. While there are greater than 8000 funds with their doors open at present, Our researchers choose to focus on the elite of this group, about 700 funds. These money managers manage bulk of the smart money’s total asset base, and by keeping an eye on their inimitable investments, Insider Monkey has found many investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, we’re going to analyze the key action encompassing The Blackstone Group L.P. (NYSE:BX).
What does the smart money think about The Blackstone Group L.P. (NYSE:BX)?
At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the most valuable position in The Blackstone Group L.P. (NYSE:BX). Select Equity Group has a $71.8 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is Martin Hughes of Toscafund Asset Management, with a $63.9 million position; the fund has 23.2% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Julian Robertson’s Tiger Management, Thomas E. Claugus’s GMT Capital and Jim Simons’s Renaissance Technologies.
Because The Blackstone Group L.P. (NYSE:BX) has witnessed a declination in interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers that elected to cut their full holdings heading into Q4. Intriguingly, Andy Redleaf’s Whitebox Advisors dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $3.4 million in stock, and Wojciech Uzdelewicz’s Espalier Global Management was right behind this move, as the fund cut about $2.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to The Blackstone Group L.P. (NYSE:BX). We will take a look at Automatic Data Processing (NASDAQ:ADP), American Tower Corp (NYSE:AMT), Deutsche Bank AG (USA) (NYSE:DB), and Anthem Inc (NYSE:ANTM). All of these stocks’ market caps match BX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ADP | 32 | 957220 | -10 |
| AMT | 42 | 2352373 | 3 |
| DB | 8 | 132760 | -4 |
| ANTM | 55 | 3154504 | -5 |
As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1649 million. That figure was $406 million in BX’s case. Anthem Inc (NYSE:ANTM) is the most popular stock in this table, while Deutsche Bank AG (USA) (NYSE:DB) is the least popular one. Although the Blackstone Group L.P. (NYSE:BX), with 34 bullish hedge fund positions is not the least popular stock in this group, it has not attracted much attention from investors. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are collectively most fond of, such as ANTM in this particular case.
