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 Broadridge Financial Solutions, Inc. (NYSE:BR).
Broadridge Financial Solutions, Inc. (NYSE:BR) was in 29 hedge funds' portfolios at the end of the first quarter of 2020. BR has experienced a decrease in hedge fund interest of late. There were 35 hedge funds in our database with BR positions at the end of the previous quarter. Our calculations also showed that BR isn't among the 30 most popular stocks among hedge funds (click for Q1 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 58 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.
[caption id="attachment_758429" align="aligncenter" width="399"] Ric Dillon of Diamond Hill Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny cannabis play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to take a look at the recent hedge fund action regarding Broadridge Financial Solutions, Inc. (NYSE:BR).
How have hedgies been trading Broadridge Financial Solutions, Inc. (NYSE:BR)?
At the end of the first quarter, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in BR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Junto Capital Management held the most valuable stake in Broadridge Financial Solutions, Inc. (NYSE:BR), which was worth $69.4 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $46.5 million worth of shares. Bristol Gate Capital Partners, Sunriver Management, and Diamond Hill 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 Strycker View Capital allocated the biggest weight to Broadridge Financial Solutions, Inc. (NYSE:BR), around 11.36% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, dishing out 6.54 percent of its 13F equity portfolio to BR.
Judging by the fact that Broadridge Financial Solutions, Inc. (NYSE:BR) has experienced declining sentiment from the smart money, we can see that there is a sect of fund managers who were dropping their entire stakes in the first quarter. It's worth mentioning that Renaissance Technologies dropped the largest position of all the hedgies tracked by Insider Monkey, valued at an estimated $15.9 million in stock. John Osterweis's fund, Osterweis Capital Management, also dropped its stock, about $15.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 6 funds in the first quarter.
Let's go over hedge fund activity in other stocks similar to Broadridge Financial Solutions, Inc. (NYSE:BR). These stocks are Teledyne Technologies Incorporated (NYSE:TDY), Nucor Corporation (NYSE:NUE), Baker Hughes Company (NYSE:BKR), and UDR, Inc. (NYSE:UDR). All of these stocks' market caps resemble BR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TDY,21,384671,-3 NUE,26,95527,0 BKR,30,281145,-7 UDR,19,249574,-2 Average,24,252729,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $307 million in BR's case. Baker Hughes Company (NYSE:BKR) is the most popular stock in this table. On the other hand UDR, Inc. (NYSE:UDR) is the least popular one with only 19 bullish hedge fund positions. Broadridge Financial Solutions, Inc. (NYSE:BR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on BR as the stock returned 27.7% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.