Was The Smart Money Right About Piling Into Brunswick Corporation (BC)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Brunswick Corporation (NYSE:BC) changed recently.

Is Brunswick Corporation (NYSE:BC) worth your attention right now? The best stock pickers were taking a bullish view. The number of long hedge fund bets inched up by 12 in recent months. Brunswick Corporation (NYSE:BC) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistics is 36. Our calculations also showed that BC 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). There were 23 hedge funds in our database with BC holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most shareholders, hedge funds are assumed to be slow, old financial tools of years past. While there are over 8000 funds in operation today, Our researchers look at the leaders of this group, approximately 850 funds. These hedge fund managers preside over the lion’s share of the smart money’s total asset base, and by paying attention to their best equity investments, Insider Monkey has spotted various investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year 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 .

David Siegel of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 biggest telecom companies to identify fast growing companies in various industries. 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. Keeping this in mind we’re going to take a gander at the fresh hedge fund action encompassing Brunswick Corporation (NYSE:BC).

How have hedgies been trading Brunswick Corporation (NYSE:BC)?

At second quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 52% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BC over the last 20 quarters. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Among these funds, Two Sigma Advisors held the most valuable stake in Brunswick Corporation (NYSE:BC), which was worth $588.4 million at the end of the third quarter. On the second spot was Cantillon Capital Management which amassed $266.1 million worth of shares. Arrowstreet Capital, Lakewood Capital Management, and Kensico 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 Levin Capital Strategies allocated the biggest weight to Brunswick Corporation (NYSE:BC), around 4.7% of its 13F portfolio. Lakewood Capital Management is also relatively very bullish on the stock, setting aside 4.24 percent of its 13F equity portfolio to BC.

Now, key hedge funds have been driving this bullishness. Kensico Capital, managed by Michael Lowenstein, initiated the most outsized position in Brunswick Corporation (NYSE:BC). Kensico Capital had $60.8 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $51.9 million investment in the stock during the quarter. The other funds with new positions in the stock are John A. Levin’s Levin Capital Strategies, Ken Heebner’s Capital Growth Management, and John Brennan’s Sirios Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Brunswick Corporation (NYSE:BC). We will take a look at National Instruments Corporation (NASDAQ:NATI), CDK Global Inc (NASDAQ:CDK), Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), Lincoln Electric Holdings, Inc. (NASDAQ:LECO), Euronet Worldwide, Inc. (NASDAQ:EEFT), Mirati Therapeutics, Inc. (NASDAQ:MRTX), and Old Republic International Corporation (NYSE:ORI). This group of stocks’ market valuations are similar to BC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $424 million. That figure was $1426 million in BC’s case. Euronet Worldwide, Inc. (NASDAQ:EEFT) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 5 bullish hedge fund positions. Brunswick Corporation (NYSE:BC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BC is 86. 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 23% in 2020 through October 30th and beat the market again by 20.1 percentage points. Unfortunately BC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BC were disappointed as the stock returned -0.1% since the end of June (through 10/30) 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.

Disclosure: None. This article was originally published at Insider Monkey.