"October lived up to its scary reputation—the S&P 500 falling in the month by the largest amount in the last 40 years, the only worse Octobers being '08 and the Crash of '87. For perspective, there have been only 5 occasions in those 40 years when the S&P 500 declined by greater than 20% from peak to trough. Other than the '87 Crash, all were during recessions. There were 17 other instances, over the same time frame, when the market fell by over 10% but less than 20%. Furthermore, this is the 18th correction of 5% or more since the current bull market started in March '09. Corrections are the norm. They can be healthy as they often undo market complacency—overbought levels—potentially allowing the market to base and move even higher." This is how Trapeze Asset Management summarized the recent market moves in its investor letter. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards one of the stocks hedge funds invest in.
Briggs & Stratton Corporation (NYSE:BGG) was in 10 hedge funds' portfolios at the end of December. BGG investors should pay attention to a decrease in hedge fund sentiment of late. There were 15 hedge funds in our database with BGG holdings at the end of the previous quarter. Our calculations also showed that bgg isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the recent hedge fund action regarding Briggs & Stratton Corporation (NYSE:BGG).
How are hedge funds trading Briggs & Stratton Corporation (NYSE:BGG)?
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BGG over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Briggs & Stratton Corporation (NYSE:BGG), with a stake worth $2.8 million reported as of the end of December. Trailing D E Shaw was Citadel Investment Group, which amassed a stake valued at $2.7 million. Harvest Capital Strategies, Renaissance Technologies, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Briggs & Stratton Corporation (NYSE:BGG) has experienced declining sentiment from the smart money, we can see that there was a specific group of hedge funds who were dropping their positions entirely by the end of the third quarter. Intriguingly, Joel Greenblatt's Gotham Asset Management dropped the biggest investment of all the hedgies followed by Insider Monkey, comprising an estimated $0.9 million in stock. John A. Levin's fund, Levin Capital Strategies, also sold off its stock, about $0.3 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 5 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to Briggs & Stratton Corporation (NYSE:BGG). We will take a look at Aptinyx Inc. (NASDAQ:APTX), Global Partners LP (NYSE:GLP), The India Fund, Inc. (NYSE:IFN), and Ballard Power Systems Inc. (NASDAQ:BLDP). This group of stocks' market caps resemble BGG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APTX,9,117219,-3 GLP,4,1482,2 IFN,2,1265,1 BLDP,2,174,-1 Average,4.25,30035,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $15 million in BGG's case. Aptinyx Inc. (NASDAQ:APTX) is the most popular stock in this table. On the other hand The India Fund, (The) (NYSE:IFN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Briggs & Stratton Corporation (NYSE:BGG) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately BGG wasn't nearly as popular as these 15 stock and hedge funds that were betting on BGG were disappointed as the stock returned 7.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.