How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding The Brink’s Company (NYSE:BCO) and determine whether hedge funds had an edge regarding this stock.
The Brink’s Company (NYSE:BCO) was in 25 hedge funds’ portfolios at the end of June. The all time high for this statistics is 27. BCO investors should be aware of an increase in enthusiasm from smart money of late. There were 24 hedge funds in our database with BCO positions at the end of the first quarter. Our calculations also showed that BCO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are perceived as slow, old financial tools of yesteryear. While there are more than 8000 funds in operation at present, Our researchers look at the leaders of this group, approximately 850 funds. Most estimates calculate that this group of people manage most of the smart money’s total capital, and by shadowing their highest performing picks, Insider Monkey has brought to light various investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to analyze the key hedge fund action surrounding The Brink’s Company (NYSE:BCO).
What have hedge funds been doing with The Brink’s Company (NYSE:BCO)?
At Q2’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BCO over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, P2 Capital Partners held the most valuable stake in The Brink’s Company (NYSE:BCO), which was worth $90 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $32.6 million worth of shares. Brahman Capital, Renaissance Technologies, and Arrowstreet Capital 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 P2 Capital Partners allocated the biggest weight to The Brink’s Company (NYSE:BCO), around 7.51% of its 13F portfolio. Brahman Capital is also relatively very bullish on the stock, setting aside 2.91 percent of its 13F equity portfolio to BCO.
As industrywide interest jumped, specific money managers have been driving this bullishness. Brahman Capital, managed by Mitch Kuflik and Rob Sobel, assembled the most outsized position in The Brink’s Company (NYSE:BCO). Brahman Capital had $30 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $21.4 million position during the quarter. The other funds with new positions in the stock are Marc Majzner’s Clearline Capital, Brian Gootzeit and Andrew Frank’s StackLine Partners, and Dan Kozlowski’s Plaisance Capital.
Let’s now review hedge fund activity in other stocks similar to The Brink’s Company (NYSE:BCO). We will take a look at Fabrinet (NYSE:FN), MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), Colliers International Group Inc (NASDAQ:CIGI), Tootsie Roll Industries, Inc. (NYSE:TR), Opko Health Inc. (NASDAQ:OPK), Telephone & Data Systems, Inc. (NYSE:TDS), and Sterling Bancorp (NYSE:STL). This group of stocks’ market valuations are closest to BCO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FN | 23 | 120739 | 1 |
| MTSI | 23 | 290386 | 7 |
| CIGI | 11 | 527308 | 1 |
| TR | 19 | 81934 | 5 |
| OPK | 16 | 51806 | 3 |
| TDS | 21 | 175372 | 0 |
| STL | 27 | 179819 | 2 |
| Average | 20 | 203909 | 2.7 |
View table here if you experience formatting issues.
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 $204 million. That figure was $256 million in BCO’s case. Sterling Bancorp (NYSE:STL) is the most popular stock in this table. On the other hand Colliers International Group Inc (NASDAQ:CIGI) is the least popular one with only 11 bullish hedge fund positions. The Brink’s Company (NYSE:BCO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BCO is 77.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately BCO wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BCO were disappointed as the stock returned -11.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
