Is Babcock & Wilcox Enterprises Inc (NYSE:BW) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Babcock & Wilcox Enterprises Inc (NYSE:BW) was in 14 hedge funds' portfolios at the end of the third quarter of 2018. BW has seen a decrease in hedge fund sentiment recently. There were 18 hedge funds in our database with BW positions at the end of the previous quarter. Our calculations also showed that BW isn't among the 30 most popular stocks among hedge funds.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a look at the recent hedge fund action regarding Babcock & Wilcox Enterprises Inc (NYSE:BW).
How have hedgies been trading Babcock & Wilcox Enterprises Inc (NYSE:BW)?
Heading into the fourth quarter of 2018, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BW over the last 13 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, Steel Partners held the most valuable stake in Babcock & Wilcox Enterprises Inc (NYSE:BW), which was worth $30.9 million at the end of the third quarter. On the second spot was D E Shaw which amassed $7.6 million worth of shares. Moreover, Engaged Capital, Wynnefield Capital, and Royce & Associates were also bullish on Babcock & Wilcox Enterprises Inc (NYSE:BW), allocating a large percentage of their portfolios to this stock.
Since Babcock & Wilcox Enterprises Inc (NYSE:BW) has faced falling interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of money managers that elected to cut their full holdings last quarter. Interestingly, Gavin Saitowitz and Cisco J. del Valle's Springbok Capital dropped the largest position of the 700 funds monitored by Insider Monkey, totaling close to $1.3 million in stock. Jim Simons's fund, Renaissance Technologies, also cut its stock, about $1.1 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds last quarter.
Let's check out hedge fund activity in other stocks similar to Babcock & Wilcox Enterprises Inc (NYSE:BW). We will take a look at Cloud Peak Energy Inc. (NYSE:CLD), Constellation Pharmaceuticals, Inc. (NASDAQ:CNST), Gencor Industries, Inc. (NASDAQ:GENC), and Mackinac Financial Corporation (NASDAQ:MFNC). This group of stocks' market values are closest to BW's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLD,9,27236,-2 CNST,8,32391,8 GENC,4,23812,0 MFNC,4,13219,-1 Average,6.25,24165,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $55 million in BW's case. Cloud Peak Energy Inc. (NYSE:CLD) is the most popular stock in this table. On the other hand Gencor Industries, Inc. (NASDAQ:GENC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Babcock & Wilcox Enterprises Inc (NYSE:BW) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.