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With the third-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 fourth quarter. One of these stocks was Brooks Automation, Inc. (NASDAQ:BRKS).
Is BRKS a good stock to buy now? Hedge funds were taking a bullish view. The number of bullish hedge fund bets improved by 2 recently. Brooks Automation, Inc. (NASDAQ:BRKS) was in 17 hedge funds' portfolios at the end of September. The all time high for this statistic is 28. Our calculations also showed that BRKS 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.
John Levin of Levin 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. Now we're going to review the latest hedge fund action regarding Brooks Automation, Inc. (NASDAQ:BRKS).
Do Hedge Funds Think BRKS Is A Good Stock To Buy Now?
At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in BRKS a year ago. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Brooks Automation, Inc. (NASDAQ:BRKS), with a stake worth $47.8 million reported as of the end of September. Trailing Fisher Asset Management was Tower House Partners, which amassed a stake valued at $47.6 million. Royce & Associates, Millennium Management, and Intrinsic Edge Capital 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 Tower House Partners allocated the biggest weight to Brooks Automation, Inc. (NASDAQ:BRKS), around 25.52% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, designating 2.4 percent of its 13F equity portfolio to BRKS.
With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Renaissance Technologies, assembled the most outsized position in Brooks Automation, Inc. (NASDAQ:BRKS). Renaissance Technologies had $3.6 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also made a $1.4 million investment in the stock during the quarter. The following funds were also among the new BRKS investors: Dmitry Balyasny's Balyasny Asset Management, John A. Levin's Levin Capital Strategies, and Hoon Kim's Quantinno Capital.
Let's check out hedge fund activity in other stocks similar to Brooks Automation, Inc. (NASDAQ:BRKS). We will take a look at LiveRamp Holdings, Inc. (NYSE:RAMP), Hamilton Lane Incorporated (NASDAQ:HLNE), Lightspeed POS Inc. (NYSE:LSPD), SL Green Realty Corp (NYSE:SLG), New Relic Inc (NYSE:NEWR), Velodyne Lidar, Inc. (NASDAQ:VLDR), and Twist Bioscience Corporation (NASDAQ:TWST). This group of stocks' market values resemble BRKS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RAMP,28,157294,3 HLNE,16,75971,-3 LSPD,11,158403,11 SLG,23,208309,-3 NEWR,31,1144221,-4 VLDR,13,121409,-3 TWST,21,408033,2 Average,20.4,324806,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $162 million in BRKS's case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand Lightspeed POS Inc. (NYSE:LSPD) is the least popular one with only 11 bullish hedge fund positions. Brooks Automation, Inc. (NASDAQ:BRKS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BRKS is 40.2. 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 BRKS as the stock returned 62.5% 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.