World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
BGC Partners, Inc. (NASDAQ:BGCP) has seen a decrease in hedge fund sentiment in recent months. BGCP was in 25 hedge funds' portfolios at the end of the second quarter of 2019. There were 26 hedge funds in our database with BGCP holdings at the end of the previous quarter. Our calculations also showed that BGCP isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the latest hedge fund action regarding BGC Partners, Inc. (NASDAQ:BGCP).
How have hedgies been trading BGC Partners, Inc. (NASDAQ:BGCP)?
Heading into the third quarter of 2019, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. By comparison, 24 hedge funds held shares or bullish call options in BGCP a year ago. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Cardinal Capital was the largest shareholder of BGC Partners, Inc. (NASDAQ:BGCP), with a stake worth $72.9 million reported as of the end of March. Trailing Cardinal Capital was Point72 Asset Management, which amassed a stake valued at $57.3 million. Rubric Capital Management, Soros Fund Management, and AQR Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that BGC Partners, Inc. (NASDAQ:BGCP) has faced falling interest from hedge fund managers, it's easy to see that there lies a certain "tier" of money managers who sold off their entire stakes in the second quarter. It's worth mentioning that Usman Waheed's Strycker View Capital dropped the biggest investment of the "upper crust" of funds monitored by Insider Monkey, comprising close to $11.7 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund said goodbye to about $0.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 1 funds in the second quarter.
Let's also examine hedge fund activity in other stocks similar to BGC Partners, Inc. (NASDAQ:BGCP). These stocks are BancFirst Corporation (NASDAQ:BANF), Golar LNG Limited (NASDAQ:GLNG), Cott Corporation (NYSE:COT), and Core-Mark Holding Company, Inc. (NASDAQ:CORE). This group of stocks' market caps are similar to BGCP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BANF,9,47285,-2 GLNG,23,347857,-5 COT,27,415487,-1 CORE,24,72451,0 Average,20.75,220770,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $221 million. That figure was $249 million in BGCP's case. Cott Corporation (NYSE:COT) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 9 bullish hedge fund positions. BGC Partners, Inc. (NASDAQ:BGCP) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on BGCP as the stock returned 8.2% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.