Is Broadridge Financial Solutions, Inc. (NYSE:BR) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is Broadridge Financial Solutions, Inc. (NYSE:BR) a buy here? The smart money is in a bullish mood. The number of bullish hedge fund bets went up by 4 lately. Our calculations also showed that BR isn't among the 30 most popular stocks among hedge funds.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let's view the key hedge fund action surrounding Broadridge Financial Solutions, Inc. (NYSE:BR).
How have hedgies been trading Broadridge Financial Solutions, Inc. (NYSE:BR)?
At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in BR a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in Broadridge Financial Solutions, Inc. (NYSE:BR) was held by AQR Capital Management, which reported holding $183 million worth of stock at the end of March. It was followed by Balyasny Asset Management with a $35.1 million position. Other investors bullish on the company included Millennium Management, Arrowstreet Capital, and Diamond Hill Capital.
Now, specific money managers were leading the bulls' herd. Osterweis Capital Management, managed by John Osterweis, established the biggest position in Broadridge Financial Solutions, Inc. (NYSE:BR). Osterweis Capital Management had $14 million invested in the company at the end of the quarter. Greg Poole's Echo Street Capital Management also initiated a $12.9 million position during the quarter. The other funds with new positions in the stock are Brad Dunkley and Blair Levinsky's Waratah Capital Advisors, Glenn Russell Dubin's Highbridge Capital Management, and D. E. Shaw's D E Shaw.
Let's also examine hedge fund activity in other stocks similar to Broadridge Financial Solutions, Inc. (NYSE:BR). We will take a look at Lincoln National Corporation (NYSE:LNC), The AES Corporation (NYSE:AES), Wabtec Corporation (NYSE:WAB), and Norwegian Cruise Line Holdings Ltd (NYSE:NCLH). This group of stocks' market values are closest to BR's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LNC,40,563951,7 AES,24,525751,-5 WAB,36,783264,26 NCLH,35,1020481,-5 Average,33.75,723362,5.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $723 million. That figure was $397 million in BR's case. Lincoln National Corporation (NYSE:LNC) is the most popular stock in this table. On the other hand The AES Corporation (NYSE:AES) is the least popular one with only 24 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 calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on BR as the stock returned 20.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.