Should You Avoid Brown-Forman Corporation (BF)?

Judging by the fact that Brown-Forman Corporation (NYSE:BF) has witnessed a decline in interest from the smart money, it’s safe to say that there was a specific group of hedgies that decided to sell off their entire stakes by the end of the third quarter. It’s worth mentioning that Jim Simons’ Renaissance Technologies cut the largest investment of the 700 funds tracked by Insider Monkey, totaling an estimated $35.3 million in stock. Phill Gross and Robert Atchinson’s fund, Adage Capital Management, also dumped its stock, about $11 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Brown-Forman Corporation (NYSE:BF) but similarly valued. We will take a look at Canadian Pacific Railway Limited (USA) (NYSE:CP), Hormel Foods Corporation (NYSE:HRL), Omnicom Group Inc. (NYSE:OMC), and L Brands Inc (NYSE:LB). This group of stocks’ market valuations are similar to BF’s market valuation.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1.25 billion. That figure was $615 million in BF’s case. Canadian Pacific Railway Limited (USA) (NYSE:CP) is the most popular stock in this table. On the other hand Omnicom Group Inc. (NYSE:OMC) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Brown-Forman Corporation (NYSE:BF) is even less popular than OMC. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None