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Is Babcock & Wilcox Enterprises Inc (BW) Going to Burn These Hedge Funds?

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·5 min read
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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Babcock & Wilcox Enterprises Inc (NYSE:BW).

Is Babcock & Wilcox Enterprises Inc (NYSE:BW) a cheap investment now? The smart money was turning bullish. The number of bullish hedge fund positions inched up by 12 in recent months. Babcock & Wilcox Enterprises Inc (NYSE:BW) was in 22 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 26. Our calculations also showed that BW isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 10 hedge funds in our database with BW positions at the end of the fourth quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce
Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. 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 homepage. With all of this in mind let's take a look at the recent hedge fund action surrounding Babcock & Wilcox Enterprises Inc (NYSE:BW).

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

At Q1's end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 120% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BW over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BW A Good Stock To Buy?
Is BW A Good Stock To Buy?

More specifically, Portolan Capital Management was the largest shareholder of Babcock & Wilcox Enterprises Inc (NYSE:BW), with a stake worth $35.9 million reported as of the end of March. Trailing Portolan Capital Management was Cannell Capital, which amassed a stake valued at $11.3 million. Adage Capital Management, Royce & Associates, and Citadel Investment Group 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 Portolan Capital Management allocated the biggest weight to Babcock & Wilcox Enterprises Inc (NYSE:BW), around 2.82% of its 13F portfolio. Gratia Capital is also relatively very bullish on the stock, designating 2.53 percent of its 13F equity portfolio to BW.

Now, specific money managers were leading the bulls' herd. Portolan Capital Management, managed by George McCabe, established the largest position in Babcock & Wilcox Enterprises Inc (NYSE:BW). Portolan Capital Management had $35.9 million invested in the company at the end of the quarter. J. Carlo Cannell's Cannell Capital also made a $11.3 million investment in the stock during the quarter. The following funds were also among the new BW investors: Phill Gross and Robert Atchinson's Adage Capital Management, Chuck Royce's Royce & Associates, and Ken Griffin's Citadel Investment Group.

Let's check out hedge fund activity in other stocks similar to Babcock & Wilcox Enterprises Inc (NYSE:BW). We will take a look at Lands' End, Inc. (NASDAQ:LE), CarLotz, Inc. (NASDAQ:LOTZ), DRDGOLD Ltd. (NYSE:DRD), CleanSpark, Inc. (NASDAQ:CLSK), Brightcove Inc (NASDAQ:BCOV), ADTRAN, Inc. (NASDAQ:ADTN), and Organigram Holdings Inc. (NASDAQ:OGI). This group of stocks' market values resemble BW's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LE,12,66471,1 LOTZ,19,106452,0 DRD,5,17080,0 CLSK,8,33086,3 BCOV,21,292077,-1 ADTN,10,75318,-1 OGI,9,15213,5 Average,12,86528,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $96 million in BW's case. Brightcove Inc (NASDAQ:BCOV) is the most popular stock in this table. On the other hand DRDGOLD Ltd. (NYSE:DRD) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Babcock & Wilcox Enterprises Inc (NYSE:BW) is more popular among hedge funds. Our overall hedge fund sentiment score for BW is 85.4. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately BW wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BW were disappointed as the stock returned -28.8% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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