We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Bunge Limited (NYSE:BG) and determine whether hedge funds skillfully traded this stock.
Bunge Limited (NYSE:BG) has experienced a decrease in activity from the world's largest hedge funds in recent months. Bunge Limited (NYSE:BG) was in 37 hedge funds' portfolios at the end of June. The all time high for this statistics is 44. Our calculations also showed that BG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
If you'd ask most market participants, hedge funds are viewed as underperforming, outdated investment vehicles of yesteryear. While there are greater than 8000 funds trading at present, Our researchers hone in on the aristocrats of this group, around 850 funds. These money managers command the lion's share of the hedge fund industry's total asset base, and by following their finest stock picks, Insider Monkey has spotted various investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Fred DiSanto of Ancora Advisors
At Insider Monkey we scour multiple sources to uncover 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 and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let's take a look at the key hedge fund action surrounding Bunge Limited (NYSE:BG).
Hedge fund activity in Bunge Limited (NYSE:BG)
Heading into the third quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the first quarter of 2020. On the other hand, there were a total of 31 hedge funds with a bullish position in BG a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of Bunge Limited (NYSE:BG), with a stake worth $125.2 million reported as of the end of September. Trailing Adage Capital Management was Moore Global Investments, which amassed a stake valued at $117.7 million. Millennium Management, Renaissance Technologies, and Greenhaven Associates 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 Game Creek Capital allocated the biggest weight to Bunge Limited (NYSE:BG), around 4.13% of its 13F portfolio. Moore Global Investments is also relatively very bullish on the stock, setting aside 3.16 percent of its 13F equity portfolio to BG.
Due to the fact that Bunge Limited (NYSE:BG) has experienced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few fund managers who were dropping their full holdings last quarter. At the top of the heap, Jack Woodruff's Candlestick Capital Management cut the largest position of the 750 funds tracked by Insider Monkey, valued at an estimated $29.9 million in stock. Alexander Mitchell's fund, Scopus Asset Management, also dropped its stock, about $9 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Bunge Limited (NYSE:BG) but similarly valued. These stocks are Aluminum Corp. of China Limited (NYSE:ACH), Store Capital Corporation (NYSE:STOR), Schrodinger, Inc. (NASDAQ:SDGR), Healthcare Trust Of America Inc (NYSE:HTA), Sibanye Stillwater Limited (NYSE:SBSW), Cenovus Energy Inc (NYSE:CVE), and Signature Bank (NASDAQ:SBNY). All of these stocks' market caps resemble BG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACH,6,3451,4 STOR,16,689832,-9 SDGR,15,1099632,0 HTA,16,163019,0 SBSW,17,115611,-2 CVE,26,314936,2 SBNY,24,305465,5 Average,17.1,384564,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $385 million. That figure was $620 million in BG's case. Cenovus Energy Inc (NYSE:CVE) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Bunge Limited (NYSE:BG) is more popular among hedge funds. Our overall hedge fund sentiment score for BG is 78.2. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately BG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BG were disappointed as the stock returned 12.1% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Get real-time email alerts: Follow Bungeltd (NYSE:BG)
Disclosure: None. This article was originally published at Insider Monkey.