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Bunge Limited (BG) Fell Out Of Favor With Hedge Funds

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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Bunge Limited (NYSE:BG) to find out whether there were any major changes in hedge funds' views.

Is Bunge Limited (NYSE:BG) a healthy stock for your portfolio? Money managers were taking a bearish view. The number of bullish hedge fund bets dropped by 7 lately. Bunge Limited (NYSE:BG) was in 44 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 51. Our calculations also showed that BG isn't among the 30 most popular stocks among hedge funds (click for Q1 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 $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Robert Pohly of Samlyn Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Now we're going to take a look at the key hedge fund action regarding Bunge Limited (NYSE:BG).

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

At first quarter's end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 39 hedge funds held shares or bullish call options in BG a year ago. With hedgies' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Is BG A Good Stock To Buy?
Is BG A Good Stock To Buy?

The largest stake in Bunge Limited (NYSE:BG) was held by Adage Capital Management, which reported holding $81.3 million worth of stock at the end of December. It was followed by Samlyn Capital with a $58.5 million position. Other investors bullish on the company included Alyeska Investment Group, Greenhaven Associates, and Point State Capital. In terms of the portfolio weights assigned to each position Yost Capital Management allocated the biggest weight to Bunge Limited (NYSE:BG), around 16.37% of its 13F portfolio. Brightline Capital is also relatively very bullish on the stock, setting aside 10.7 percent of its 13F equity portfolio to BG.

Due to the fact that Bunge Limited (NYSE:BG) has experienced bearish sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of hedge funds that slashed their entire stakes heading into Q2. Interestingly, Dmitry Balyasny's Balyasny Asset Management said goodbye to the largest position of all the hedgies watched by Insider Monkey, valued at close to $48.7 million in stock, and David Rosen's Rubric Capital Management was right behind this move, as the fund cut about $45.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds heading into Q2.

Let's now take a look at hedge fund activity in other stocks similar to Bunge Limited (NYSE:BG). These stocks are The Gap Inc. (NYSE:GPS), Universal Display Corporation (NASDAQ:OLED), Playtika Holding Corp. (NASDAQ:PLTK), The Toro Company (NYSE:TTC), Booz Allen Hamilton Holding Corporation (NYSE:BAH), BorgWarner Inc. (NYSE:BWA), and Zynga Inc (NASDAQ:ZNGA). This group of stocks' market values are similar to BG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPS,42,988959,4 OLED,17,95398,-7 PLTK,21,444574,21 TTC,32,1016572,1 BAH,29,178958,2 BWA,27,590548,0 ZNGA,47,1143096,-5 Average,30.7,636872,2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.7 hedge funds with bullish positions and the average amount invested in these stocks was $637 million. That figure was $653 million in BG's case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Universal Display Corporation (NASDAQ:OLED) is the least popular one with only 17 bullish hedge fund positions. Bunge Limited (NYSE:BG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BG is 68.9. 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately BG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BG were disappointed as the stock returned -2.1% since the end of March (through 6/18) 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.