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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards BrightSphere Investment Group Inc (NYSE:BSIG).
Is BSIG stock a buy? BrightSphere Investment Group Inc (NYSE:BSIG) was in 26 hedge funds' portfolios at the end of December. The all time high for this statistic is 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. BSIG has experienced an increase in hedge fund interest recently. There were 25 hedge funds in our database with BSIG positions at the end of the third quarter. Our calculations also showed that BSIG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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. Hedge funds have more than $3 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
John Paulson of Paulson & Co
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. Now we're going to take a gander at the recent hedge fund action surrounding BrightSphere Investment Group Inc (NYSE:BSIG).
Do Hedge Funds Think BSIG Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BSIG over the last 22 quarters. With hedgies' capital changing hands, there exists an "upper tier" of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
Among these funds, Paulson & Co held the most valuable stake in BrightSphere Investment Group Inc (NYSE:BSIG), which was worth $385.6 million at the end of the fourth quarter. On the second spot was Interval Partners which amassed $46.5 million worth of shares. Azora Capital, Schonfeld Strategic Advisors, and Point72 Asset 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 Paulson & Co allocated the biggest weight to BrightSphere Investment Group Inc (NYSE:BSIG), around 10.01% of its 13F portfolio. Toscafund Asset Management is also relatively very bullish on the stock, designating 7.86 percent of its 13F equity portfolio to BSIG.
As one would reasonably expect, specific money managers have been driving this bullishness. Gillson Capital, managed by Daniel Johnson, established the largest position in BrightSphere Investment Group Inc (NYSE:BSIG). Gillson Capital had $15.8 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $2.8 million investment in the stock during the quarter. The other funds with brand new BSIG positions are Allon Hellmann's Full18 Capital, Renaissance Technologies, and Paul Marshall and Ian Wace's Marshall Wace LLP.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as BrightSphere Investment Group Inc (NYSE:BSIG) but similarly valued. We will take a look at Global Net Lease, Inc. (NYSE:GNL), Bally's Corporation (NYSE:BALY), Inseego Corp. (NASDAQ:INSG), LTC Properties Inc (NYSE:LTC), Aurora Cannabis Inc. (NASDAQ:ACB), Forma Therapeutics Holdings, Inc. (NASDAQ:FMTX), and HeadHunter Group PLC (NASDAQ:HHR). All of these stocks' market caps are similar to BSIG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GNL,7,11265,0 BALY,25,343176,8 INSG,16,52617,5 LTC,8,6128,-1 ACB,10,14646,0 FMTX,17,775269,7 HHR,7,9076,-1 Average,12.9,173168,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $173 million. That figure was $635 million in BSIG's case. Bally's Corporation (NYSE:BALY) is the most popular stock in this table. On the other hand Global Net Lease, Inc. (NYSE:GNL) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks BrightSphere Investment Group Inc (NYSE:BSIG) is more popular among hedge funds. Our overall hedge fund sentiment score for BSIG is 86. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on BSIG as the stock returned 20.8% since the end of December (through 4/19) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.