"Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital, and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value," are the words of Maran Capital's Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards BWX Technologies Inc (NYSE:BWXT) and see how it was affected.
BWX Technologies Inc (NYSE:BWXT) investors should be aware of a decrease in support from the world's most elite money managers lately. Our calculations also showed that BWXT isn't among the 30 most popular stocks among hedge funds.
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. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's view the new hedge fund action surrounding BWX Technologies Inc (NYSE:BWXT).
How are hedge funds trading BWX Technologies Inc (NYSE:BWXT)?
At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in BWXT heading into this year. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Alkeon Capital Management held the most valuable stake in BWX Technologies Inc (NYSE:BWXT), which was worth $75.9 million at the end of the third quarter. On the second spot was Cardinal Capital which amassed $40.8 million worth of shares. Moreover, AQR Capital Management, D E Shaw, and Ancora Advisors were also bullish on BWX Technologies Inc (NYSE:BWXT), allocating a large percentage of their portfolios to this stock.
Since BWX Technologies Inc (NYSE:BWXT) has experienced a decline in interest from the smart money, it's safe to say that there is a sect of hedge funds who sold off their positions entirely by the end of the third quarter. It's worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the largest position of the "upper crust" of funds tracked by Insider Monkey, valued at close to $21.8 million in stock. Israel Englander's fund, Millennium Management, also dumped its stock, about $14 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 6 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to BWX Technologies Inc (NYSE:BWXT). We will take a look at WABCO Holdings Inc. (NYSE:WBC), Eaton Vance Corp (NYSE:EV), LG Display Co Ltd. (NYSE:LPL), and United Microelectronics Corp (NYSE:UMC). This group of stocks' market valuations match BWXT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WBC,15,590018,-8 EV,15,148925,0 LPL,6,27533,-3 UMC,17,91798,5 Average,13.25,214569,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $205 million in BWXT's case. United Microelectronics Corp (NYSE:UMC) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 6 bullish hedge fund positions. BWX Technologies Inc (NYSE:BWXT) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard UMC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.