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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Broadstone Net Lease, Inc. (NYSE:BNL) based on that data.
Is BNL a good stock to buy now? The best stock pickers were in an optimistic mood. The number of long hedge fund bets inched up by 12 recently. Broadstone Net Lease, Inc. (NYSE:BNL) was in 12 hedge funds' portfolios at the end of September. Our calculations also showed that BNL 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 percentage points since March 2017 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Jeffrey Talpins of Element Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 glance at the key hedge fund action regarding Broadstone Net Lease, Inc. (NYSE:BNL).
Do Hedge Funds Think BNL Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12 from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in BNL a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, V3 Capital held the most valuable stake in Broadstone Net Lease, Inc. (NYSE:BNL), which was worth $22.9 million at the end of the third quarter. On the second spot was Millennium Management which amassed $21.1 million worth of shares. Alyeska Investment Group, Citadel Investment Group, and Element Capital Management 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 V3 Capital allocated the biggest weight to Broadstone Net Lease, Inc. (NYSE:BNL), around 5.24% of its 13F portfolio. Element Capital Management is also relatively very bullish on the stock, dishing out 1.71 percent of its 13F equity portfolio to BNL.
As aggregate interest increased, key hedge funds have jumped into Broadstone Net Lease, Inc. (NYSE:BNL) headfirst. V3 Capital, managed by Charles Fitzgerald, established the largest position in Broadstone Net Lease, Inc. (NYSE:BNL). V3 Capital had $22.9 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $21.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Anand Parekh's Alyeska Investment Group, Ken Griffin's Citadel Investment Group, and Jeffrey Talpins's Element Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Broadstone Net Lease, Inc. (NYSE:BNL) but similarly valued. We will take a look at Webster Financial Corporation (NYSE:WBS), Norbord Inc. (NYSE:OSB), Commercial Metals Company (NYSE:CMC), FirstCash, Inc. (NASDAQ:FCFS), HB Fuller Co (NYSE:FUL), Kratos Defense & Security Solutions, Inc (NASDAQ:KTOS), and Tri Pointe Group Inc (NYSE:TPH). This group of stocks' market caps are similar to BNL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WBS,25,264192,-5 OSB,13,76406,2 CMC,20,103252,-2 FCFS,21,168321,-1 FUL,16,141330,6 KTOS,14,31213,-8 TPH,31,257365,0 Average,20,148868,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $91 million in BNL's case. Tri Pointe Group Inc (NYSE:TPH) is the most popular stock in this table. On the other hand Norbord Inc. (NYSE:OSB) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Broadstone Net Lease, Inc. (NYSE:BNL) is even less popular than OSB. Our overall hedge fund sentiment score for BNL is 10. 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 but managed to beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on BNL, though not to the same extent, as the stock returned 10.5% since the end of September (through December 8th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.