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Is Bel Fuse, Inc. (NASDAQ:BELFB) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Hedge fund interest in Bel Fuse, Inc. (NASDAQ:BELFB) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare BELFB to other stocks including FedNat Holding Company (NASDAQ:FNHC), Foamix Pharmaceuticals Ltd (NASDAQ:FOMX), and Evans Bancorp Inc. (NYSE:EVBN) to get a better sense of its popularity.
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.
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Howard Marks of Oaktree Capital Management[/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 based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Let's take a look at the fresh hedge fund action regarding Bel Fuse, Inc. (NASDAQ:BELFB).
Hedge fund activity in Bel Fuse, Inc. (NASDAQ:BELFB)
At Q3's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in BELFB over the last 17 quarters. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Bel Fuse, Inc. (NASDAQ:BELFB), which was worth $7.6 million at the end of the third quarter. On the second spot was Oaktree Capital Management which amassed $7 million worth of shares. Polaris Capital Management, Millennium Management, and Marshall Wace 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 Oaktree Capital Management allocated the biggest weight to Bel Fuse, Inc. (NASDAQ:BELFB), around 0.14% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, earmarking 0.08 percent of its 13F equity portfolio to BELFB.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Two Sigma Advisors. 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 Marshall Wace).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Bel Fuse, Inc. (NASDAQ:BELFB) but similarly valued. We will take a look at FedNat Holding Company (NASDAQ:FNHC), Foamix Pharmaceuticals Ltd (NASDAQ:FOMX), Evans Bancorp Inc. (NYSE:EVBN), and CorMedix Inc. (NYSE:CRMD). All of these stocks' market caps resemble BELFB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FNHC,7,24724,0 FOMX,12,59402,-1 EVBN,3,5829,1 CRMD,6,7358,3 Average,7,24328,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $19 million in BELFB's case. Foamix Pharmaceuticals Ltd (NASDAQ:FOMX) is the most popular stock in this table. On the other hand Evans Bancorp Inc. (NYSE:EVBN) is the least popular one with only 3 bullish hedge fund positions. Bel Fuse, Inc. (NASDAQ:BELFB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on BELFB as the stock returned 10.8% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.