The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Brooks Automation, Inc. (NASDAQ:BRKS) from the perspective of those elite funds.
Is Brooks Automation, Inc. (NASDAQ:BRKS) a buy here? The smart money is becoming more confident. The number of long hedge fund bets inched up by 4 in recent months. Our calculations also showed that BRKS isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most shareholders, hedge funds are seen as unimportant, outdated investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, We choose to focus on the elite of this club, approximately 750 funds. These investment experts manage bulk of the hedge fund industry's total capital, and by keeping an eye on their top stock picks, Insider Monkey has unsheathed many investment strategies that have historically surpassed Mr. Market. Insider Monkey's flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
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. We're going to take a gander at the fresh hedge fund action surrounding Brooks Automation, Inc. (NASDAQ:BRKS).
What have hedge funds been doing with Brooks Automation, Inc. (NASDAQ:BRKS)?
At Q2's end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 44% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BRKS over the last 16 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Chuck Royce's Royce & Associates has the biggest position in Brooks Automation, Inc. (NASDAQ:BRKS), worth close to $53.7 million, comprising 0.5% of its total 13F portfolio. The second largest stake is held by Fisher Asset Management, managed by Ken Fisher, which holds a $41 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism encompass Efrem Kamen's Pura Vida Investments, David Harding's Winton Capital Management and J. Daniel Plants's Voce Capital.
As industrywide interest jumped, some big names were leading the bulls' herd. Fisher Asset Management, managed by Ken Fisher, initiated the most outsized position in Brooks Automation, Inc. (NASDAQ:BRKS). Fisher Asset Management had $41 million invested in the company at the end of the quarter. Efrem Kamen's Pura Vida Investments also made a $3.7 million investment in the stock during the quarter. The following funds were also among the new BRKS investors: David Harding's Winton Capital Management, Noam Gottesman's GLG Partners, and Benjamin A. Smith's Laurion Capital Management.
Let's check out hedge fund activity in other stocks similar to Brooks Automation, Inc. (NASDAQ:BRKS). These stocks are Rapid7 Inc (NASDAQ:RPD), TopBuild Corp (NYSE:BLD), American Assets Trust, Inc (NYSE:AAT), and Cabot Corporation (NYSE:CBT). This group of stocks' market valuations are closest to BRKS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RPD,25,386339,-2 BLD,14,112473,-3 AAT,15,127744,1 CBT,17,123633,-3 Average,17.75,187547,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $109 million in BRKS's case. Rapid7 Inc (NASDAQ:RPD) is the most popular stock in this table. On the other hand TopBuild Corp (NYSE:BLD) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Brooks Automation, Inc. (NASDAQ:BRKS) is even less popular than BLD. Hedge funds dodged a bullet by taking a bearish stance towards BRKS. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BRKS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BRKS investors were disappointed as the stock returned -4.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.