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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Ball Corporation (NYSE:BLL) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Ball Corporation (NYSE:BLL) has seen a decrease in hedge fund interest of late. Ball Corporation (NYSE:BLL) was in 38 hedge funds' portfolios at the end of June. The all time high for this statistics is 44. Our calculations also showed that BLL isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let's review the fresh hedge fund action encompassing Ball Corporation (NYSE:BLL).
Hedge fund activity in Ball Corporation (NYSE:BLL)
Heading into the third quarter of 2020, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BLL over the last 20 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
More specifically, Chilton Investment Company was the largest shareholder of Ball Corporation (NYSE:BLL), with a stake worth $221.3 million reported as of the end of September. Trailing Chilton Investment Company was Iridian Asset Management, which amassed a stake valued at $144.1 million. Echo Street Capital Management, MIG Capital, and D E Shaw 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 SAYA Management allocated the biggest weight to Ball Corporation (NYSE:BLL), around 7.57% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, dishing out 7.31 percent of its 13F equity portfolio to BLL.
Seeing as Ball Corporation (NYSE:BLL) has experienced falling interest from hedge fund managers, it's easy to see that there was a specific group of hedgies that elected to cut their full holdings by the end of the second quarter. At the top of the heap, Steve Cohen's Point72 Asset Management sold off the biggest stake of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $11.1 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also sold off its stock, about $9.2 million worth. These moves are important to note, as total hedge fund interest dropped by 3 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Ball Corporation (NYSE:BLL) but similarly valued. We will take a look at Kellogg Company (NYSE:K), Incyte Corporation (NASDAQ:INCY), Tencent Music Entertainment Group (NYSE:TME), Liberty Broadband Corp (NASDAQ:LBRDA), Liberty Broadband Corp (NASDAQ:LBRDK), Best Buy Co., Inc. (NYSE:BBY), and State Street Corporation (NYSE:STT). This group of stocks' market values are similar to BLL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position K,33,418366,-4 INCY,29,4432332,-11 TME,30,538341,5 LBRDA,22,718343,-4 LBRDK,58,3372154,13 BBY,33,1062886,-4 STT,36,668259,2 Average,34.4,1601526,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.4 hedge funds with bullish positions and the average amount invested in these stocks was $1602 million. That figure was $768 million in BLL's case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand Liberty Broadband Corp (NASDAQ:LBRDA) is the least popular one with only 22 bullish hedge fund positions. Ball Corporation (NYSE:BLL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BLL is 50.1. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on BLL, though not to the same extent, as the stock returned 15.9% since the end of June and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.