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Should You Avoid BWX Technologies Inc (BWXT)?

Reymerlyn Martin

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was BWX Technologies Inc (NYSE:BWXT).

Is BWX Technologies Inc (NYSE:BWXT) the right pick for your portfolio? Prominent investors are turning less bullish. The number of long hedge fund positions went down by 6 in recent months. Our calculations also showed that BWXT isn't among the 30 most popular stocks among hedge funds. BWXT was in 17 hedge funds' portfolios at the end of September. There were 23 hedge funds in our database with BWXT holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chuck Royce

We're going to take a look at the recent hedge fund action encompassing BWX Technologies Inc (NYSE:BWXT).

Hedge fund activity in BWX Technologies Inc (NYSE:BWXT)

Heading into the fourth quarter of 2018, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in BWXT over the last 13 quarters. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

BWXT_dec2018

Among these funds, Alkeon Capital Management held the most valuable stake in BWX Technologies Inc (NYSE:BWXT), which was worth $75.9 million at the end of the third quarter. On the second spot was Cardinal Capital which amassed $40.8 million worth of shares. Moreover, AQR Capital Management, D E Shaw, and Ancora Advisors were also bullish on BWX Technologies Inc (NYSE:BWXT), allocating a large percentage of their portfolios to this stock.

Since BWX Technologies Inc (NYSE:BWXT) has witnessed declining sentiment from the aggregate hedge fund industry, it's easy to see that there were a few hedge funds who were dropping their entire stakes in the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, comprising about $21.8 million in stock. Israel Englander's fund, Millennium Management, also cut its stock, about $14 million worth. These transactions are important to note, as total hedge fund interest dropped by 6 funds in the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as BWX Technologies Inc (NYSE:BWXT) but similarly valued. We will take a look at WABCO Holdings Inc. (NYSE:WBC), Eaton Vance Corp (NYSE:EV), LG Display Co Ltd. (NYSE:LPL), and United Microelectronics Corp (NYSE:UMC). All of these stocks' market caps match BWXT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WBC,15,590018,-8 EV,15,148925,0 LPL,6,27533,-3 UMC,17,91798,5 Average,13.25,214569,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $205 million in BWXT's case. United Microelectronics Corp (NYSE:UMC) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 6 bullish hedge fund positions. BWX Technologies Inc (NYSE:BWXT) 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. In this regard UMC might be a better candidate to consider a long position.

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

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