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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 Braskem SA (NYSE:BAK) based on that data.
Is Braskem SA (BAK) a good stock to buy now? BAK was in 8 hedge funds' portfolios at the end of September. The all time high for this statistics is 7. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. BAK shareholders have witnessed an increase in activity from the world's largest hedge funds of late. There were 7 hedge funds in our database with BAK positions at the end of the second quarter. Our calculations also showed that BAK 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.
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 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 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.
Howard Marks of Oaktree Capital Management
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. Now let's take a glance at the latest hedge fund action regarding Braskem SA (NYSE:BAK).
What have hedge funds been doing with Braskem SA (NYSE:BAK)?
At third quarter's end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BAK over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Contrarian Capital was the largest shareholder of Braskem SA (NYSE:BAK), with a stake worth $23.1 million reported as of the end of September. Trailing Contrarian Capital was Oaktree Capital Management, which amassed a stake valued at $3.9 million. Arrowstreet Capital, AQR Capital Management, and Millennium 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 Contrarian Capital allocated the biggest weight to Braskem SA (NYSE:BAK), around 9.84% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, setting aside 0.08 percent of its 13F equity portfolio to BAK.
Consequently, key money managers were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the most valuable position in Braskem SA (NYSE:BAK). Adage Capital Management had $0.1 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks similar to Braskem SA (NYSE:BAK). We will take a look at Mimecast Limited (NASDAQ:MIME), Nektar Therapeutics (NASDAQ:NKTR), Open Lending Corporation (NASDAQ:LPRO), Dorman Products Inc. (NASDAQ:DORM), Diodes Incorporated (NASDAQ:DIOD), Companhia Energética de Minas Gerais (NYSE:CIG), and Kohl's Corporation (NYSE:KSS). This group of stocks' market valuations are closest to BAK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MIME,25,169600,-9 NKTR,21,189419,-5 LPRO,23,394732,3 DORM,19,73961,0 DIOD,13,109463,-1 CIG,9,9794,0 KSS,38,451191,-4 Average,21.1,199737,-2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $29 million in BAK's case. Kohl's Corporation (NYSE:KSS) is the most popular stock in this table. On the other hand Companhia Energética de Minas Gerais (NYSE:CIG) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Braskem SA (NYSE:BAK) is even less popular than CIG. Our overall hedge fund sentiment score for BAK is 36. 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. Hedge funds clearly dropped the ball on BAK as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on BAK as the stock returned 14.5% since Q3 (through December 2nd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.