We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like BBX Capital Corporation (NYSE:BBX).
BBX Capital Corporation (NYSE:BBX) has experienced a decrease in support from the world’s most elite money managers lately. Our calculations also showed that BBX isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the key hedge fund action surrounding BBX Capital Corporation (NYSE:BBX).
Hedge fund activity in BBX Capital Corporation (NYSE:BBX)
At Q2’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in BBX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Angelo Gordon & Co was the largest shareholder of BBX Capital Corporation (NYSE:BBX), with a stake worth $9.6 million reported as of the end of March. Trailing Angelo Gordon & Co was Renaissance Technologies, which amassed a stake valued at $5.9 million. Fondren Management, Alta Fundamental Advisers, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as BBX Capital Corporation (NYSE:BBX) has witnessed declining sentiment from the smart money, it’s easy to see that there is a sect of hedge funds who were dropping their positions entirely by the end of the second quarter. Interestingly, Tom Wilcox’s Cider Mill Investments sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $0.6 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $0.4 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds by the end of the second quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as BBX Capital Corporation (NYSE:BBX) but similarly valued. These stocks are Golden Star Resources Ltd. (NYSE:GSS), Old Line Bancshares, Inc. (NASDAQ:OLBK), Collegium Pharmaceutical Inc (NASDAQ:COLL), and Castlight Health Inc (NYSE:CSLT). This group of stocks’ market values match BBX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GSS | 6 | 11740 | 3 |
| OLBK | 5 | 35365 | -4 |
| COLL | 16 | 70836 | -4 |
| CSLT | 16 | 27942 | 4 |
| Average | 10.75 | 36471 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $35 million in BBX’s case. Collegium Pharmaceutical Inc (NASDAQ:COLL) is the most popular stock in this table. On the other hand Old Line Bancshares, Inc. (NASDAQ:OLBK) is the least popular one with only 5 bullish hedge fund positions. BBX Capital Corporation (NYSE:BBX) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BBX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BBX were disappointed as the stock returned -4.6% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.
