Is BHP Group (NYSE:BBL) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is BHP Group (NYSE:BBL) the right investment to pursue these days? Hedge funds are getting less optimistic. The number of bullish hedge fund bets were cut by 1 in recent months. Our calculations also showed that BBL isn't among the 30 most popular stocks among hedge funds (see the video at the end of this article).
At the moment there are plenty of formulas stock market investors have at their disposal to analyze publicly traded companies. Two of the less known formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top money managers can trounce the market by a healthy amount (see the details here).
[caption id="attachment_728376" align="aligncenter" width="473"] Jonathan Barrett of Luminus Management[/caption]
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 analyze the recent hedge fund action encompassing BHP Group (NYSE:BBL).
What does smart money think about BHP Group (NYSE:BBL)?
Heading into the third quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the first quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in BBL a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in BHP Group (NYSE:BBL). Arrowstreet Capital has a $340 million position in the stock, comprising 0.8% of its 13F portfolio. The second most bullish fund manager is Fisher Asset Management, managed by Ken Fisher, which holds a $274.9 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain Bernard Horn's Polaris Capital Management, Jonathan Barrett and Paul Segal's Luminus Management and John Overdeck and David Siegel's Two Sigma Advisors.
Seeing as BHP Group (NYSE:BBL) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedge funds that decided to sell off their entire stakes last quarter. Interestingly, James Dinan's York Capital Management dropped the biggest position of all the hedgies followed by Insider Monkey, valued at an estimated $98 million in stock, and Sara Nainzadeh's Centenus Global Management was right behind this move, as the fund dumped about $1.4 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as BHP Group (NYSE:BBL) but similarly valued. We will take a look at Honeywell International Inc. (NYSE:HON), International Business Machines Corp. (NYSE:IBM), Philip Morris International Inc. (NYSE:PM), and Novo Nordisk A/S (NYSE:NVO). All of these stocks' market caps match BBL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HON,56,2476978,0 IBM,45,2040684,-1 PM,39,3794819,-4 NVO,17,2402080,-8 Average,39.25,2678640,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $2679 million. That figure was $1041 million in BBL's case. Honeywell International Inc. (NYSE:HON) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 17 bullish hedge fund positions. BHP Group (NYSE:BBL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately BBL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BBL investors were disappointed as the stock returned -13.1% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.