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How Did Berry Global Group Inc (BERY) Compare Against Top Hedge Fund Stocks in 2019?

Debasis Saha

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Berry Global Group Inc (NYSE:BERY).

Is Berry Global Group Inc (NYSE:BERY) undervalued? The best stock pickers are turning less bullish. The number of long hedge fund bets were trimmed by 1 in recent months. Our calculations also showed that BERY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 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. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_339739" align="alignnone" width="600"] Ricky Sandler of Eminence Capital[/caption]

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind let's review the latest hedge fund action regarding Berry Global Group Inc (NYSE:BERY).

What does smart money think about Berry Global Group Inc (NYSE:BERY)?

At the end of the third quarter, a total of 39 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BERY over the last 17 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is BERY A Good Stock To Buy?

Among these funds, Eminence Capital held the most valuable stake in Berry Global Group Inc (NYSE:BERY), which was worth $490 million at the end of the third quarter. On the second spot was Canyon Capital Advisors which amassed $270.9 million worth of shares. Orbis Investment Management, Luminus Management, and GLG Partners 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 Anchor Bolt Capital allocated the biggest weight to Berry Global Group Inc (NYSE:BERY), around 6.35% of its 13F portfolio. SCW Capital Management is also relatively very bullish on the stock, designating 6.08 percent of its 13F equity portfolio to BERY.

Due to the fact that Berry Global Group Inc (NYSE:BERY) has witnessed bearish sentiment from the smart money, we can see that there were a few fund managers who were dropping their positions entirely heading into Q4. At the top of the heap, Andreas Halvorsen's Viking Global dropped the largest position of the 750 funds tracked by Insider Monkey, worth about $94.9 million in stock. Daniel Lascano's fund, Lomas Capital Management, also dumped its stock, about $64.4 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q4.

Let's go over hedge fund activity in other stocks similar to Berry Global Group Inc (NYSE:BERY). These stocks are Oshkosh Corporation (NYSE:OSK), Paylocity Holding Corp (NASDAQ:PCTY), Hudson Pacific Properties Inc (NYSE:HPP), and HUYA Inc. (NYSE:HUYA). This group of stocks' market valuations are closest to BERY's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OSK,22,434865,-2 PCTY,25,313646,-3 HPP,24,260095,7 HUYA,21,361903,-1 Average,23,342627,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $343 million. That figure was $1571 million in BERY's case. Paylocity Holding Corp (NASDAQ:PCTY) is the most popular stock in this table. On the other hand HUYA Inc. (NYSE:HUYA) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Berry Global Group Inc (NYSE:BERY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately BERY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BERY were disappointed as the stock returned -0.3% so far in 2019 (through 12/23) and trailed 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 65 percent of these stocks already outperformed the market in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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