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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2020. In this article we are going to take a look at smart money sentiment towards Broadwind Inc. (NASDAQ:BWEN).
Is BWEN a good stock to buy now? Broadwind Inc. (NASDAQ:BWEN) was in 7 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 7. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. BWEN shareholders have witnessed an increase in enthusiasm from smart money of late. There were 4 hedge funds in our database with BWEN positions at the end of the second quarter. Our calculations also showed that BWEN 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.
Christian Leone of Luxor Capital Group
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 we're going to take a look at the new hedge fund action regarding Broadwind Inc. (NASDAQ:BWEN).
How have hedgies been trading Broadwind Inc. (NASDAQ:BWEN)?
At third quarter's end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 75% from the previous quarter. By comparison, 3 hedge funds held shares or bullish call options in BWEN 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.
Of the funds tracked by Insider Monkey, Luxor Capital Group, managed by Christian Leone, holds the number one position in Broadwind Inc. (NASDAQ:BWEN). Luxor Capital Group has a $2.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Renaissance Technologies, led holding a $2.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish include Ken Griffin's Citadel Investment Group, Thomas Bailard's Bailard Inc and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Luxor Capital Group allocated the biggest weight to Broadwind Inc. (NASDAQ:BWEN), around 0.05% of its 13F portfolio. Dalton Investments is also relatively very bullish on the stock, dishing out 0.02 percent of its 13F equity portfolio to BWEN.
As industrywide interest jumped, key money managers were leading the bulls' herd. Bailard Inc, managed by Thomas Bailard, created the most outsized position in Broadwind Inc. (NASDAQ:BWEN). Bailard Inc had $0.1 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also initiated a $0.1 million position during the quarter. The only other fund with a new position in the stock is John Overdeck and David Siegel's Two Sigma Advisors.
Let's also examine hedge fund activity in other stocks similar to Broadwind Inc. (NASDAQ:BWEN). These stocks are IZEA Worldwide Inc. (NASDAQ:IZEA), AmeriServ Financial, Inc. (NASDAQ:ASRV), Gulf Island Fabrication, Inc. (NASDAQ:GIFI), Hallmark Financial Services, Inc. (NASDAQ:HALL), LSB Industries, Inc. (NYSE:LXU), First Seacoast Bancorp (NASDAQ:FSEA), and ECMOHO Limited (NASDAQ:MOHO). All of these stocks' market caps are similar to BWEN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IZEA,1,22,0 ASRV,3,4529,0 GIFI,6,6449,-1 HALL,7,2053,-3 LXU,7,4494,-3 FSEA,2,208,0 MOHO,1,134,0 Average,3.9,2556,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.9 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $5 million in BWEN's case. Hallmark Financial Services, Inc. (NASDAQ:HALL) is the most popular stock in this table. On the other hand IZEA Worldwide Inc. (NASDAQ:IZEA) is the least popular one with only 1 bullish hedge fund positions. Broadwind Inc. (NASDAQ:BWEN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BWEN is 88. 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 20 most popular stocks among hedge funds 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 and still beat the market by 16 percentage points. Hedge funds were also right about betting on BWEN as the stock returned 51.6% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.