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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 Peltz's recent General Electric 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 Compania de Minas Buenaventura S.A.A. (NYSE:BVN).
Is BVN a good stock to buy now? Compania de Minas Buenaventura S.A.A. (NYSE:BVN) was in 8 hedge funds' portfolios at the end of September. The all time high for this statistics is 13. BVN has experienced an increase in hedge fund sentiment recently. There were 7 hedge funds in our database with BVN positions at the end of the second quarter. Our calculations also showed that BVN isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Ryan Tolkin, CIO of Schonfeld Strategic 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with 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. With all of this in mind let's take a gander at the fresh hedge fund action surrounding Compania de Minas Buenaventura S.A.A. (NYSE:BVN).
Hedge fund activity in Compania de Minas Buenaventura S.A.A. (NYSE:BVN)
At the end of September, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BVN over the last 21 quarters. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Oldfield Partners was the largest shareholder of Compania de Minas Buenaventura S.A.A. (NYSE:BVN), with a stake worth $56.8 million reported as of the end of September. Trailing Oldfield Partners was Arrowstreet Capital, which amassed a stake valued at $30 million. Paloma Partners, Citadel Investment Group, and Schonfeld Strategic Advisors 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 Oldfield Partners allocated the biggest weight to Compania de Minas Buenaventura S.A.A. (NYSE:BVN), around 6.13% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, setting aside 0.18 percent of its 13F equity portfolio to BVN.
As one would reasonably expect, key hedge funds were leading the bulls' herd. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), initiated the biggest position in Compania de Minas Buenaventura S.A.A. (NYSE:BVN). Schonfeld Strategic Advisors had $0.3 million invested in the company at the end of the quarter. Ran Pang's Quantamental Technologies also initiated a $0.2 million position during the quarter. The only other fund with a brand new BVN position is David Harding's Winton Capital Management.
Let's now take a look at hedge fund activity in other stocks similar to Compania de Minas Buenaventura S.A.A. (NYSE:BVN). We will take a look at SVMK Inc. (NASDAQ:SVMK), JetBlue Airways Corporation (NASDAQ:JBLU), Fox Factory Holding Corp (NASDAQ:FOXF), Selective Insurance Group, Inc. (NASDAQ:SIGI), 51job, Inc. (NASDAQ:JOBS), National Vision Holdings, Inc. (NASDAQ:EYE), and Altair Engineering Inc. (NASDAQ:ALTR). This group of stocks' market values match BVN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SVMK,33,247140,0 JBLU,23,149926,-5 FOXF,22,105772,9 SIGI,21,55364,8 JOBS,10,32482,1 EYE,18,361146,1 ALTR,14,324402,0 Average,20.1,182319,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $91 million in BVN's case. SVMK Inc. (NASDAQ:SVMK) is the most popular stock in this table. On the other hand 51job, Inc. (NASDAQ:JOBS) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Compania de Minas Buenaventura S.A.A. (NYSE:BVN) is even less popular than JOBS. Our overall hedge fund sentiment score for BVN is 24.5. 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. Hedge funds dodged a bullet by taking a bearish stance towards BVN. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd but managed to beat the market again by 16 percentage points. Unfortunately BVN wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BVN investors were disappointed as the stock returned -3.7% since the end of the third quarter (through 12/2) 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 most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.