Was The Smart Money Right About The Bank of New York Mellon Corporation (BK)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards The Bank of New York Mellon Corporation (NYSE:BK) and determine whether hedge funds skillfully traded this stock.

The Bank of New York Mellon Corporation (NYSE:BK) was in 46 hedge funds’ portfolios at the end of September. The all time high for this statistic is 58. BK investors should pay attention to a decrease in hedge fund sentiment lately. There were 52 hedge funds in our database with BK holdings at the end of June. Our calculations also showed that BK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a glance at the fresh hedge fund action regarding The Bank of New York Mellon Corporation (NYSE:BK).

Donald Yacktman of Yacktman Asset Management

Do Hedge Funds Think BK Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards BK over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in The Bank of New York Mellon Corporation (NYSE:BK) was held by Berkshire Hathaway, which reported holding $3751 million worth of stock at the end of September. It was followed by Yacktman Asset Management with a $197.6 million position. Other investors bullish on the company included D E Shaw, GAMCO Investors, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position LFL Advisers allocated the biggest weight to The Bank of New York Mellon Corporation (NYSE:BK), around 9.3% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, dishing out 2.53 percent of its 13F equity portfolio to BK.

Judging by the fact that The Bank of New York Mellon Corporation (NYSE:BK) has faced falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers that slashed their positions entirely last quarter. It’s worth mentioning that Brandon Haley’s Holocene Advisors cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $42.6 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dumped its stock, about $35.7 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 6 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to The Bank of New York Mellon Corporation (NYSE:BK). These stocks are T. Rowe Price Group, Inc. (NASDAQ:TROW), Kimberly Clark Corporation (NYSE:KMB), L3Harris Technologies, Inc. (NYSE:LHX), Veeva Systems Inc (NYSE:VEEV), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), Datadog, Inc. (NASDAQ:DDOG), and Amphenol Corporation (NYSE:APH). This group of stocks’ market caps are similar to BK’s market cap.

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As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1307 million. That figure was $4657 million in BK’s case. Datadog, Inc. (NASDAQ:DDOG) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 10 bullish hedge fund positions. The Bank of New York Mellon Corporation (NYSE:BK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BK is 57.4. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on BK as the stock returned 15.6% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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