You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Brookfield Business Partners L.P. (NYSE:BBU) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds' portfolios at the end of June. At the end of this article we will also compare BBU to other stocks including Boyd Gaming Corporation (NYSE:BYD), J&J Snack Foods Corp. (NASDAQ:JJSF), and B2Gold Corp (NYSEMKT:BTG) to get a better sense of its popularity. Our calculations also showed that BBU isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to 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' 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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's go over the fresh hedge fund action regarding Brookfield Business Partners L.P. (NYSE:BBU).
How have hedgies been trading Brookfield Business Partners L.P. (NYSE:BBU)?
At Q2's end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 5 hedge funds with a bullish position in BBU a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Vertex One Asset Management held the most valuable stake in Brookfield Business Partners L.P. (NYSE:BBU), which was worth $5.3 million at the end of the second quarter. On the second spot was Waratah Capital Advisors which amassed $4.2 million worth of shares. Moreover, Renaissance Technologies, Citadel Investment Group, and Signition LP were also bullish on Brookfield Business Partners L.P. (NYSE:BBU), allocating a large percentage of their portfolios to this stock.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the second quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now take a look at hedge fund activity in other stocks similar to Brookfield Business Partners L.P. (NYSE:BBU). These stocks are Boyd Gaming Corporation (NYSE:BYD), J&J Snack Foods Corp. (NASDAQ:JJSF), B2Gold Corp (NYSEMKT:BTG), and Delek US Holdings, Inc. (NYSE:DK). This group of stocks' market valuations resemble BBU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BYD,30,350426,2 JJSF,13,81274,-1 BTG,17,145412,1 DK,18,117625,-10 Average,19.5,173684,-2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $12 million in BBU's case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Brookfield Business Partners L.P. (NYSE:BBU) is even less popular than JJSF. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on BBU, though not to the same extent, as the stock returned 2.8% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.