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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards The Bank of New York Mellon Corporation (NYSE:BK) to find out whether there were any major changes in hedge funds' views.
Is The Bank of New York Mellon Corporation (NYSE:BK) undervalued? Money managers were taking an optimistic view. The number of bullish hedge fund bets moved up by 3 recently. The Bank of New York Mellon Corporation (NYSE:BK) was in 52 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 58. Our calculations also showed that BK isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 49 hedge funds in our database with BK holdings at the end of March.
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 79 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.
Donald Yacktman of Yacktman Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. We go through lists like the 10 best EV 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. Now we're going to check out the fresh hedge fund action encompassing The Bank of New York Mellon Corporation (NYSE:BK).
Do Hedge Funds Think BK Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the previous quarter. By comparison, 48 hedge funds held shares or bullish call options in BK a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Berkshire Hathaway was the largest shareholder of The Bank of New York Mellon Corporation (NYSE:BK), with a stake worth $3706.9 million reported as of the end of June. Trailing Berkshire Hathaway was Yacktman Asset Management, which amassed a stake valued at $196.4 million. GAMCO Investors, D E Shaw, and AQR Capital Management 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 LFL Advisers allocated the biggest weight to The Bank of New York Mellon Corporation (NYSE:BK), around 9.37% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, dishing out 2.56 percent of its 13F equity portfolio to BK.
As aggregate interest increased, key hedge funds were leading the bulls' herd. Gillson Capital, managed by Daniel Johnson, created the most valuable position in The Bank of New York Mellon Corporation (NYSE:BK). Gillson Capital had $26 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners also made a $17 million investment in the stock during the quarter. The other funds with brand new BK positions are Ravi Chopra's Azora Capital, Sander Gerber's Hudson Bay Capital Management, and Allon Hellmann's Full18 Capital.
Let's now review hedge fund activity in other stocks similar to The Bank of New York Mellon Corporation (NYSE:BK). We will take a look at Schlumberger Limited. (NYSE:SLB), TE Connectivity Ltd. (NYSE:TEL), BCE Inc. (NYSE:BCE), Match Group, Inc. (NASDAQ:MTCH), Marriott International Inc (NYSE:MAR), L3Harris Technologies, Inc. (NASDAQ:LHX), and Ross Stores, Inc. (NASDAQ:ROST). This group of stocks' market values are closest to BK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SLB,41,1067022,-9 TEL,39,2134995,0 BCE,14,113288,4 MTCH,63,3368893,-5 MAR,49,2454304,-9 LHX,42,1016540,1 ROST,51,1448653,3 Average,42.7,1657671,-2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.7 hedge funds with bullish positions and the average amount invested in these stocks was $1658 million. That figure was $4907 million in BK's case. Match Group, Inc. (NASDAQ:MTCH) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 14 bullish hedge fund positions. The Bank of New York Mellon Corporation (NYSE:BK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BK is 73.7. 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on BK as the stock returned 16.3% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.