We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Barnes Group Inc. (NYSE:B) and determine whether hedge funds skillfully traded this stock.
Barnes Group Inc. (NYSE:B) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds' portfolios at the end of March. 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 Box, Inc. (NYSE:BOX), Cal-Maine Foods Inc (NASDAQ:CALM), and PacWest Bancorp (NASDAQ:PACW) to gather more data points. Our calculations also showed that B 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.
To most traders, hedge funds are viewed as slow, old financial tools of the past. While there are more than 8000 funds in operation at present, We hone in on the moguls of this group, approximately 850 funds. These money managers control the majority of the smart money's total asset base, and by tailing their best stock picks, Insider Monkey has formulated many investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
[caption id="attachment_26092" align="aligncenter" width="400"] Joel Greenblatt of Gotham Asset Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. 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 review the key hedge fund action regarding Barnes Group Inc. (NYSE:B).
What does smart money think about Barnes Group Inc. (NYSE:B)?
At Q1's end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards B over the last 18 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Barnes Group Inc. (NYSE:B), which was worth $6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $2.5 million worth of shares. D E Shaw, GLG Partners, 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 Engineers Gate Manager allocated the biggest weight to Barnes Group Inc. (NYSE:B), around 0.01% of its 13F portfolio. GLG Partners is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to B.
Due to the fact that Barnes Group Inc. (NYSE:B) has witnessed declining sentiment from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of money managers who sold off their entire stakes heading into Q4. Intriguingly, Minhua Zhang's Weld Capital Management dropped the largest stake of all the hedgies monitored by Insider Monkey, worth about $1.1 million in stock, and Mika Toikka's AlphaCrest Capital Management was right behind this move, as the fund dumped about $0.5 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's check out hedge fund activity in other stocks similar to Barnes Group Inc. (NYSE:B). We will take a look at Box, Inc. (NYSE:BOX), Cal-Maine Foods Inc (NASDAQ:CALM), PacWest Bancorp (NASDAQ:PACW), and Element Solutions Inc. (NYSE:ESI). This group of stocks' market valuations match B's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BOX,34,487198,-1 CALM,26,219068,11 PACW,23,121550,-8 ESI,35,387209,-2 Average,29.5,303756,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $304 million. That figure was $14 million in B's case. Element Solutions Inc. (NYSE:ESI) is the most popular stock in this table. On the other hand PacWest Bancorp (NASDAQ:PACW) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Barnes Group Inc. (NYSE:B) is even less popular than PACW. Hedge funds dodged a bullet by taking a bearish stance towards B. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately B wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); B investors were disappointed as the stock returned -5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.