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Is Blue Bird Corporation (BLBD) Going to Burn These Hedge Funds?

Asma UL Husna

Does Blue Bird Corporation (NASDAQ:BLBD) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Blue Bird Corporation (NASDAQ:BLBD) was in 7 hedge funds' portfolios at the end of the third quarter of 2019. BLBD shareholders have witnessed an increase in support from the world's most elite money managers lately. There were 5 hedge funds in our database with BLBD positions at the end of the previous quarter. Our calculations also showed that BLBD isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Today there are a large number of metrics shareholders put to use to value stocks. Two of the most underrated metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top money managers can outclass their index-focused peers by a superb margin (see the details here).

[caption id="attachment_733253" align="aligncenter" width="473"] Arnaud Ajdler of Engine Capital[/caption]

Arnaud Ajdler Engine Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to take a look at the fresh hedge fund action encompassing Blue Bird Corporation (NASDAQ:BLBD).

What have hedge funds been doing with Blue Bird Corporation (NASDAQ:BLBD)?

At Q3's end, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BLBD over the last 17 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Blue Bird Corporation (NASDAQ:BLBD) was held by Osterweis Capital Management, which reported holding $24.2 million worth of stock at the end of September. It was followed by Spitfire Capital with a $18.1 million position. Other investors bullish on the company included Renaissance Technologies, Engine Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Spitfire Capital allocated the biggest weight to Blue Bird Corporation (NASDAQ:BLBD), around 23.42% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, earmarking 1.77 percent of its 13F equity portfolio to BLBD.

As one would reasonably expect, specific money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, established the most outsized position in Blue Bird Corporation (NASDAQ:BLBD). Winton Capital Management had $0.6 million invested in the company at the end of the quarter. Roger Ibbotson's Zebra Capital Management also initiated a $0.2 million position during the quarter.

Let's go over hedge fund activity in other stocks similar to Blue Bird Corporation (NASDAQ:BLBD). We will take a look at Sunlands Technology Group (NYSE:STG), Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), TransMedics Group, Inc. (NASDAQ:TMDX), and Loop Industries, Inc. (NASDAQ:LOOP). This group of stocks' market valuations resemble BLBD's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STG,1,885,0 ACHN,18,82556,4 TMDX,4,94901,-3 LOOP,2,408,1 Average,6.25,44688,0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $57 million in BLBD's case. Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) is the most popular stock in this table. On the other hand Sunlands Technology Group (NYSE:STG) is the least popular one with only 1 bullish hedge fund positions. Blue Bird Corporation (NASDAQ:BLBD) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on BLBD, though not to the same extent, as the stock returned 6.9% during the first two months of the fourth quarter and outperformed the market as well.

Disclosure: None. This article was originally published at Insider Monkey.

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