U.S. Markets closed

How Did The Blackstone Group L.P. (BX) 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 The Blackstone Group L.P. (NYSE:BX).

The Blackstone Group L.P. (NYSE:BX) has seen an increase in hedge fund interest in recent months. Our calculations also showed that BX 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).

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_670753" align="alignnone" width="1613"] John Armitage of Egerton Capital[/caption]

John Armitage Egerton Capital

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 take a glance at the recent hedge fund action surrounding The Blackstone Group L.P. (NYSE:BX).

How are hedge funds trading The Blackstone Group L.P. (NYSE:BX)?

At Q3's end, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 37% from one quarter earlier. By comparison, 35 hedge funds held shares or bullish call options in BX 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.

Is BX A Good Stock To Buy?

Among these funds, Egerton Capital Limited held the most valuable stake in The Blackstone Group L.P. (NYSE:BX), which was worth $614.3 million at the end of the third quarter. On the second spot was GQG Partners which amassed $328.2 million worth of shares. HMI Capital, D E Shaw, and Chilton Investment Company 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 HMI Capital allocated the biggest weight to The Blackstone Group L.P. (NYSE:BX), around 13.15% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, setting aside 7.7 percent of its 13F equity portfolio to BX.

Now, some big names were breaking ground themselves. Egerton Capital Limited, managed by John Armitage, initiated the most valuable position in The Blackstone Group L.P. (NYSE:BX). Egerton Capital Limited had $614.3 million invested in the company at the end of the quarter. Rajiv Jain's GQG Partners also initiated a $328.2 million position during the quarter. The other funds with new positions in the stock are David E. Shaw's D E Shaw, John W. Rogers's Ariel Investments, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.

Let's go over hedge fund activity in other stocks similar to The Blackstone Group L.P. (NYSE:BX). These stocks are Crown Castle International Corp. (NYSE:CCI), CIGNA Corporation (NYSE:CI), Ecolab Inc. (NYSE:ECL), and Boston Scientific Corporation (NYSE:BSX). This group of stocks' market caps are similar to BX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCI,34,1849678,1 CI,62,3080624,14 ECL,38,2169031,11 BSX,48,2372367,-2 Average,45.5,2367925,6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.5 hedge funds with bullish positions and the average amount invested in these stocks was $2368 million. That figure was $1572 million in BX's case. CIGNA Corporation (NYSE:CI) is the most popular stock in this table. On the other hand Crown Castle International Corp. (NYSE:CCI) is the least popular one with only 34 bullish hedge fund positions. The Blackstone Group L.P. (NYSE:BX) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on BX as the stock returned 94% in 2019 through December 23rd and outperformed the market by an even larger margin. 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.

Related Content