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How Did BlackBerry Limited (BB) Perform In Comparison to Hedge Fund Favorites in 2019?

Nina Todic

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds' top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by 14.5 percentage points. That's a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Is BlackBerry Limited (NYSE:BB) a healthy stock for your portfolio? Investors who are in the know are taking a bullish view. The number of long hedge fund bets went up by 3 recently. Our calculations also showed that BB 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). BB was in 28 hedge funds' portfolios at the end of the third quarter of 2019. There were 25 hedge funds in our database with BB holdings at the end of the previous quarter.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_365194" align="aligncenter" width="450"] David E. Shaw of D.E. Shaw[/caption]

David E. Shaw of D.E. Shaw

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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 is still extremely cheap despite already gaining 20 percent. Now we're going to check out the key hedge fund action surrounding BlackBerry Limited (NYSE:BB).

Hedge fund activity in BlackBerry Limited (NYSE:BB)

At Q3's end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BB over the last 17 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, Fairfax Financial Holdings was the largest shareholder of BlackBerry Limited (NYSE:BB), with a stake worth $244.8 million reported as of the end of September. Trailing Fairfax Financial Holdings was Iridian Asset Management, which amassed a stake valued at $52.5 million. Kahn Brothers, D E Shaw, and Renaissance Technologies 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 Fairfax Financial Holdings allocated the biggest weight to BlackBerry Limited (NYSE:BB), around 11.3% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, designating 3.73 percent of its 13F equity portfolio to BB.

As aggregate interest increased, some big names were breaking ground themselves. Clearline Capital, managed by Marc Majzner, established the most outsized position in BlackBerry Limited (NYSE:BB). Clearline Capital had $2.1 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $0.9 million investment in the stock during the quarter. The other funds with brand new BB positions are John Thiessen's Vertex One Asset Management, Charles Davidson and Joseph Jacobs's Wexford Capital, and Israel Englander's Millennium Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as BlackBerry Limited (NYSE:BB) but similarly valued. We will take a look at Novanta Inc. (NASDAQ:NOVT), Colliers International Group Inc (NASDAQ:CIGI), Rexnord Corporation (NYSE:RXN), and Verint Systems Inc. (NASDAQ:VRNT). This group of stocks' market valuations are closest to BB's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOVT,9,46032,-4 CIGI,11,714194,1 RXN,19,213644,-1 VRNT,21,268774,-2 Average,15,310661,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $402 million in BB's case. Verint Systems Inc. (NASDAQ:VRNT) is the most popular stock in this table. On the other hand Novanta Inc. (NASDAQ:NOVT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks BlackBerry Limited (NYSE:BB) is more popular among hedge funds. 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 10.1 percentage points. Unfortunately BB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BB were disappointed as the stock returned -9.7% in 2019 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 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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