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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Babcock & Wilcox Enterprises Inc (NYSE:BW) based on those filings.
Hedge fund interest in Babcock & Wilcox Enterprises Inc (NYSE:BW) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Penn Virginia Corporation (NASDAQ:PVAC), Vista Gold Corp. (NYSE:VGZ), and Richardson Electronics, Ltd. (NASDAQ:RELL) to gather more data points. Our calculations also showed that BW isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are dozens of indicators market participants can use to value their stock investments. A pair of the most underrated indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can outperform the market by a solid amount (see the details here).
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Warren Lichtenstein of Steel Partners[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a gander at the key hedge fund action surrounding Babcock & Wilcox Enterprises Inc (NYSE:BW).
What does smart money think about Babcock & Wilcox Enterprises Inc (NYSE:BW)?
At Q1's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in BW over the last 18 quarters. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, John R. Wagner's SCW Capital Management has the number one position in Babcock & Wilcox Enterprises Inc (NYSE:BW), worth close to $1.9 million, accounting for 1.7% of its total 13F portfolio. The second largest stake is held by Eric Singer of VIEX Capital Advisors, with a $1.5 million position; 1.8% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish include Warren Lichtenstein's Steel Partners, Nelson Obus's Wynnefield Capital and Renaissance Technologies. In terms of the portfolio weights assigned to each position VIEX Capital Advisors allocated the biggest weight to Babcock & Wilcox Enterprises Inc (NYSE:BW), around 1.82% of its 13F portfolio. SCW Capital Management is also relatively very bullish on the stock, dishing out 1.72 percent of its 13F equity portfolio to BW.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was D E Shaw).
Let's check out hedge fund activity in other stocks similar to Babcock & Wilcox Enterprises Inc (NYSE:BW). These stocks are Penn Virginia Corporation (NASDAQ:PVAC), Vista Gold Corp. (NYSE:VGZ), Richardson Electronics, Ltd. (NASDAQ:RELL), and JMP Group LLC (NYSE:JMP). This group of stocks' market valuations are closest to BW's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PVAC,16,20598,1 VGZ,3,8733,0 RELL,4,9036,0 JMP,2,95,1 Average,6.25,9616,0.5 [/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 $10 million. That figure was $6 million in BW's case. Penn Virginia Corporation (NASDAQ:PVAC) is the most popular stock in this table. On the other hand JMP Group LLC (NYSE:JMP) is the least popular one with only 2 bullish hedge fund positions. Babcock & Wilcox Enterprises Inc (NYSE:BW) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on BW as the stock returned 133.3% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.