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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about The Bank of New York Mellon Corporation (NYSE:BK) in this article.
Is BK a good stock to buy now? Hedge fund interest in The Bank of New York Mellon Corporation (NYSE:BK) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare BK to other stocks including Johnson Controls International plc (NYSE:JCI), Banco Bradesco SA (NYSE:BBD), and Splunk Inc (NASDAQ:SPLK) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most investors, hedge funds are assumed to be slow, outdated investment tools of the past. While there are more than 8000 funds trading today, Our researchers hone in on the leaders of this club, about 850 funds. Most estimates calculate that this group of people orchestrate the majority of the smart money's total capital, and by watching their matchless equity investments, Insider Monkey has unearthed many investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Donald Yacktman of Yacktman Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this cannabis tech stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to take a look at the new hedge fund action regarding The Bank of New York Mellon Corporation (NYSE:BK).
Do Hedge Funds Think BK Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 55 hedge funds held shares or bullish call options in BK a year ago. So, let's see 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, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in The Bank of New York Mellon Corporation (NYSE:BK). Berkshire Hathaway has a $2.4848 billion position in the stock, comprising 1.1% of its 13F portfolio. On Berkshire Hathaway's heels is GLG Partners, led by Noam Gottesman, holding a $190.7 million position; 0.8% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism contain D. E. Shaw's D E Shaw, Cliff Asness's AQR Capital Management and Donald Yacktman's Yacktman Asset Management. 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 7.69% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, earmarking 5.9 percent of its 13F equity portfolio to BK.
Because The Bank of New York Mellon Corporation (NYSE:BK) has experienced bearish sentiment from the aggregate hedge fund industry, it's easy to see that there is a sect of hedgies who sold off their positions entirely in the third quarter. At the top of the heap, Nelson Peltz's Trian Partners sold off the largest stake of the "upper crust" of funds monitored by Insider Monkey, comprising an estimated $169.4 million in stock, and George Soros's Soros Fund Management was right behind this move, as the fund cut about $31.9 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as The Bank of New York Mellon Corporation (NYSE:BK) but similarly valued. These stocks are Johnson Controls International plc (NYSE:JCI), Banco Bradesco SA (NYSE:BBD), Splunk Inc (NASDAQ:SPLK), IQVIA Holdings, Inc. (NYSE:IQV), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), Verisk Analytics, Inc. (NASDAQ:VRSK), and KLA Corporation (NASDAQ:KLAC). This group of stocks' market caps resemble BK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JCI,24,892177,-4 BBD,20,213273,2 SPLK,44,1031842,-5 IQV,64,3333467,-2 CRWD,71,4300669,-7 VRSK,40,1112108,4 KLAC,33,899003,-4 Average,42.3,1683220,-2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.3 hedge funds with bullish positions and the average amount invested in these stocks was $1683 million. That figure was $3729 million in BK's case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Banco Bradesco SA (NYSE:BBD) is the least popular one with only 20 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 57.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on BK as the stock returned 19.8% since the end of Q3 (through 12/8) 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.