How do we determine whether Ballantyne Strong Inc (NYSE:BTN) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Is Ballantyne Strong Inc (NYSE:BTN) ready to rally soon? Hedge funds are betting on the stock. The number of long hedge fund positions rose by 1 in recent months. Our calculations also showed that BTN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). BTN was in 3 hedge funds' portfolios at the end of September. There were 2 hedge funds in our database with BTN positions at the end of the previous quarter. Video: Click the image to 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_731890" align="aligncenter" width="450"] John Rogers of Ariel Investments[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now let's take a look at the fresh hedge fund action surrounding Ballantyne Strong Inc (NYSE:BTN).
What have hedge funds been doing with Ballantyne Strong Inc (NYSE:BTN)?
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 2 hedge funds with a bullish position in BTN a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John W. Rogers's Ariel Investments has the most valuable position in Ballantyne Strong Inc (NYSE:BTN), worth close to $9.5 million, amounting to 0.1% of its total 13F portfolio. On Ariel Investments's heels is Renaissance Technologies which holds a $1.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to Ballantyne Strong Inc (NYSE:BTN), around 0.13% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, earmarking 0.06 percent of its 13F equity portfolio to BTN.
As industrywide interest jumped, some big names have jumped into Ballantyne Strong Inc (NYSE:BTN) headfirst. SG Capital Management, managed by Ken Grossman and Glen Schneider, established the largest position in Ballantyne Strong Inc (NYSE:BTN). SG Capital Management had $0.3 million invested in the company at the end of the quarter.
Let's go over hedge fund activity in other stocks similar to Ballantyne Strong Inc (NYSE:BTN). We will take a look at Eastside Distilling, Inc. (NASDAQ:EAST), Big 5 Sporting Goods Corporation (NASDAQ:BGFV), Aclaris Therapeutics, Inc. (NASDAQ:ACRS), and BBQ Holdings, Inc. (NASDAQ:BBQ). This group of stocks' market values are similar to BTN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EAST,4,4670,-1 BGFV,12,5737,-2 ACRS,15,19036,1 BBQ,4,18207,4 Average,8.75,11913,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $12 million in BTN's case. Aclaris Therapeutics, Inc. (NASDAQ:ACRS) is the most popular stock in this table. On the other hand Eastside Distilling, Inc. (NASDAQ:EAST) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Ballantyne Strong Inc (NYSE:BTN) is even less popular than EAST. Hedge funds dodged a bullet by taking a bearish stance towards BTN. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BTN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BTN investors were disappointed as the stock returned -13.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.