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Brooks Automation, Inc. (BRKS): Hedge Funds In Wait-and-See Mode

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At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Brooks Automation, Inc. (NASDAQ:BRKS) makes for a good investment right now.

Brooks Automation, Inc. (NASDAQ:BRKS) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 25 hedge funds' portfolios at the end of March. Our calculations also showed that BRKS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare BRKS to other stocks including Credit Acceptance Corp. (NASDAQ:CACC), Alcoa Corporation (NYSE:AA), and LHC Group, Inc. (NASDAQ:LHCG) to get a better sense of its popularity.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce
Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to take a glance at the fresh hedge fund action regarding Brooks Automation, Inc. (NASDAQ:BRKS).

Do Hedge Funds Think BRKS Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. On the other hand, there were a total of 18 hedge funds with a bullish position in BRKS a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, Fisher Asset Management held the most valuable stake in Brooks Automation, Inc. (NASDAQ:BRKS), which was worth $77.3 million at the end of the fourth quarter. On the second spot was Tower House Partners which amassed $47.1 million worth of shares. Royce & Associates, Sandler Capital Management, and Osterweis Capital Management 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 22.92% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, dishing out 5.61 percent of its 13F equity portfolio to BRKS.

Judging by the fact that Brooks Automation, Inc. (NASDAQ:BRKS) has witnessed declining sentiment from the smart money, logic holds that there were a few funds who were dropping their full holdings in the first quarter. Intriguingly, Steve Cohen's Point72 Asset Management dumped the largest stake of all the hedgies followed by Insider Monkey, comprising close to $2.8 million in stock, and Richard Mashaal's Rima Senvest Management was right behind this move, as the fund said goodbye to about $1.3 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Brooks Automation, Inc. (NASDAQ:BRKS) but similarly valued. These stocks are Credit Acceptance Corp. (NASDAQ:CACC), Alcoa Corporation (NYSE:AA), LHC Group, Inc. (NASDAQ:LHCG), Chindata Group Holdings Limited (NASDAQ:CD), Pure Storage, Inc. (NYSE:PSTG), Ingredion Incorporated (NYSE:INGR), and Healthcare Trust Of America Inc (NYSE:HTA). 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 CACC,23,544483,-6 AA,38,1003019,5 LHCG,18,77772,-7 CD,9,127683,-3 PSTG,30,1090136,9 INGR,25,455337,1 HTA,17,119726,3 Average,22.9,488308,0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $488 million. That figure was $254 million in BRKS's case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Chindata Group Holdings Limited (NASDAQ:CD) is the least popular one with only 9 bullish hedge fund positions. Brooks Automation, Inc. (NASDAQ:BRKS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BRKS is 59.4. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately BRKS wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BRKS were disappointed as the stock returned 10.2% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.