Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 8.7% through October 26th. Forty percent of the S&P 500 constituents were down more than 10%. The average return of a randomly picked stock in the index is -9.5%. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 25 most popular S&P 500 stocks among hedge funds had an average loss of 8.8%. In this article, we will take a look at what hedge funds think about Brooks Automation, Inc. (NASDAQ:BRKS).
Is Brooks Automation, Inc. (NASDAQ:BRKS) a healthy stock for your portfolio? Prominent investors are buying. The number of bullish hedge fund bets increased by 2 recently. Our calculations also showed that brks isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s review the recent hedge fund action regarding Brooks Automation, Inc. (NASDAQ:BRKS).
Hedge fund activity in Brooks Automation, Inc. (NASDAQ:BRKS)
Heading into the fourth quarter of 2018, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BRKS over the last 13 quarters. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the largest position in Brooks Automation, Inc. (NASDAQ:BRKS). Royce & Associates has a $50.3 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is Israel Englander of Millennium Management, with a $44.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Steve Cohen’s Point72 Asset Management, Efrem Kamen’s Pura Vida Investments and Cliff Asness’s AQR Capital Management.
As industrywide interest jumped, some big names were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, initiated the largest position in Brooks Automation, Inc. (NASDAQ:BRKS). Point72 Asset Management had $24.6 million invested in the company at the end of the quarter. Efrem Kamen’s Pura Vida Investments also made a $5.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Richard Driehaus’s Driehaus Capital and David Costen Haley’s HBK Investments.
Let’s now review hedge fund activity in other stocks similar to Brooks Automation, Inc. (NASDAQ:BRKS). These stocks are DDR Corp (NYSE:DDR), PriceSmart, Inc. (NASDAQ:PSMT), Beacon Roofing Supply, Inc. (NASDAQ:BECN), and Heron Therapeutics Inc (NASDAQ:HRTX). This group of stocks’ market caps resemble BRKS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DDR | 12 | 136063 | -3 |
| PSMT | 9 | 36325 | 5 |
| BECN | 21 | 382408 | -4 |
| HRTX | 31 | 785278 | 6 |
| Average | 18.25 | 335019 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $335 million. That figure was $140 million in BRKS’s case. Heron Therapeutics Inc (NASDAQ:HRTX) is the most popular stock in this table. On the other hand PriceSmart, Inc. (NASDAQ:PSMT) is the least popular one with only 9 bullish hedge fund positions. Brooks Automation, Inc. (NASDAQ:BRKS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard HRTX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
