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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Brady Corp (NYSE:BRC).
Is Brady Corp (NYSE:BRC) a marvelous investment today? Hedge funds were buying. The number of long hedge fund positions increased by 2 lately. Brady Corp (NYSE:BRC) was in 19 hedge funds' portfolios at the end of September. The all time high for this statistic is 20. Our calculations also showed that BRC 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ian Wace of Marshall Wace
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 view the fresh hedge fund action encompassing Brady Corp (NYSE:BRC).
Do Hedge Funds Think BRC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BRC 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.
Among these funds, Renaissance Technologies held the most valuable stake in Brady Corp (NYSE:BRC), which was worth $86.8 million at the end of the third quarter. On the second spot was Ariel Investments which amassed $16.8 million worth of shares. Millennium Management, Marshall Wace LLP, and D E Shaw 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 Ariel Investments allocated the biggest weight to Brady Corp (NYSE:BRC), around 0.24% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.1 percent of its 13F equity portfolio to BRC.
Now, some big names have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, established the largest position in Brady Corp (NYSE:BRC). Marshall Wace LLP had $7 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also initiated a $1.9 million position during the quarter. The only other fund with a brand new BRC position is Matthew Hulsizer's PEAK6 Capital Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Brady Corp (NYSE:BRC) but similarly valued. We will take a look at Moog Inc (NYSE:MOG), Arconic Corporation (NYSE:ARNC), The Brink's Company (NYSE:BCO), Old National Bancorp (NASDAQ:ONB), SPX Corporation (NYSE:SPXC), Canadian Solar Inc. (NASDAQ:CSIQ), and Coty Inc (NYSE:COTY). All of these stocks' market caps are similar to BRC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MOG,19,111492,-4 ARNC,21,633163,5 BCO,28,301172,3 ONB,14,20773,-3 SPXC,13,45983,-5 CSIQ,25,245570,13 COTY,26,83467,0 Average,20.9,205946,1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $206 million. That figure was $140 million in BRC's case. The Brink's Company (NYSE:BCO) is the most popular stock in this table. On the other hand SPX Corporation (NYSE:SPXC) is the least popular one with only 13 bullish hedge fund positions. Brady Corp (NYSE:BRC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BRC is 55.5. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on BRC as the stock returned 18.6% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.