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With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Broadridge Financial Solutions, Inc. (NYSE:BR).
Is BR stock a buy? Broadridge Financial Solutions, Inc. (NYSE:BR) was in 25 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 35. BR investors should be aware of a decrease in activity from the world's largest hedge funds in recent months. There were 33 hedge funds in our database with BR holdings at the end of September. Our calculations also showed that BR isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Mario Gabelli of GAMCO Investors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. Keeping this in mind let's take a peek at the recent hedge fund action regarding Broadridge Financial Solutions, Inc. (NYSE:BR).
Do Hedge Funds Think BR Is A Good Stock To Buy Now?
At Q4's end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the third quarter of 2020. On the other hand, there were a total of 35 hedge funds with a bullish position in BR a year ago. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Bristol Gate Capital Partners was the largest shareholder of Broadridge Financial Solutions, Inc. (NYSE:BR), with a stake worth $70.7 million reported as of the end of December. Trailing Bristol Gate Capital Partners was Diamond Hill Capital, which amassed a stake valued at $27.7 million. Arrowstreet Capital, AQR Capital Management, and Adage 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 Bristol Gate Capital Partners allocated the biggest weight to Broadridge Financial Solutions, Inc. (NYSE:BR), around 4.69% of its 13F portfolio. Lunia Capital is also relatively very bullish on the stock, earmarking 3.85 percent of its 13F equity portfolio to BR.
Because Broadridge Financial Solutions, Inc. (NYSE:BR) has experienced falling interest from the entirety of the hedge funds we track, it's easy to see that there were a few money managers who sold off their entire stakes last quarter. Intriguingly, Matthew Hulsizer's PEAK6 Capital Management dropped the biggest stake of all the hedgies watched by Insider Monkey, comprising about $2.2 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund said goodbye to about $1.3 million worth. These transactions are important to note, as total hedge fund interest dropped by 8 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Broadridge Financial Solutions, Inc. (NYSE:BR). These stocks are Martin Marietta Materials, Inc. (NYSE:MLM), NovoCure Limited (NASDAQ:NVCR), Tyler Technologies, Inc. (NYSE:TYL), The Hartford Financial Services Group Inc (NYSE:HIG), NICE Ltd (NASDAQ:NICE), GDS Holdings Limited (NASDAQ:GDS), and Ubiquiti Inc. (NYSE:UI). This group of stocks' market caps are similar to BR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MLM,41,2010592,3 NVCR,22,417787,0 TYL,32,592915,1 HIG,36,1559898,0 NICE,26,726097,0 GDS,39,2874120,-8 UI,19,319456,-1 Average,30.7,1214409,-0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.7 hedge funds with bullish positions and the average amount invested in these stocks was $1214 million. That figure was $244 million in BR's case. Martin Marietta Materials, Inc. (NYSE:MLM) is the most popular stock in this table. On the other hand Ubiquiti Inc. (NYSE:UI) is the least popular one with only 19 bullish hedge fund positions. Broadridge Financial Solutions, Inc. (NYSE:BR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BR is 32.1. 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. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately BR wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); BR investors were disappointed as the stock returned 2.2% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.