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Did Hedge Funds Catch A Break With BrightSphere Investment Group Inc (BSIG)?

·5 min read

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of BrightSphere Investment Group Inc (NYSE:BSIG) based on that data and determine whether they were really smart about the stock.

BrightSphere Investment Group Inc (NYSE:BSIG) investors should be aware of an increase in hedge fund sentiment lately. BrightSphere Investment Group Inc (NYSE:BSIG) was in 30 hedge funds' portfolios at the end of September. The all time high for this statistic was previously 29. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BSIG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let's check out the fresh hedge fund action surrounding BrightSphere Investment Group Inc (NYSE:BSIG).

Nathaniel August - Mangrove Partners
Nathaniel August - Mangrove Partners

Nathaniel August of Mangrove Partners

Do Hedge Funds Think BSIG Is A Good Stock To Buy Now?

At Q3's end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in BSIG a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Paulson & Co was the largest shareholder of BrightSphere Investment Group Inc (NYSE:BSIG), with a stake worth $522.6 million reported as of the end of September. Trailing Paulson & Co was Azora Capital, which amassed a stake valued at $76.6 million. Balyasny Asset Management, Arrowstreet Capital, and Schonfeld Strategic Advisors 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 Paulson & Co allocated the biggest weight to BrightSphere Investment Group Inc (NYSE:BSIG), around 14.89% of its 13F portfolio. Toscafund Asset Management is also relatively very bullish on the stock, earmarking 9.41 percent of its 13F equity portfolio to BSIG.

Now, specific money managers were breaking ground themselves. Mangrove Partners, managed by Nathaniel August, initiated the biggest position in BrightSphere Investment Group Inc (NYSE:BSIG). Mangrove Partners had $6.4 million invested in the company at the end of the quarter. Usman Waheed's Strycker View Capital also initiated a $5.6 million position during the quarter. The other funds with new positions in the stock are Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital) and Mika Toikka's AlphaCrest Capital Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as BrightSphere Investment Group Inc (NYSE:BSIG) but similarly valued. We will take a look at Raven Industries, Inc. (NASDAQ:RAVN), Grocery Outlet Holding Corp. (NASDAQ:GO), Myovant Sciences Ltd. (NYSE:MYOV), Zuora, Inc. (NYSE:ZUO), SmileDirectClub, Inc. (NASDAQ:SDC), Morphic Holding, Inc. (NASDAQ:MORF), and Enerplus Corp (NYSE:ERF). This group of stocks' market caps resemble BSIG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RAVN,17,315196,-5 GO,19,78826,6 MYOV,13,40733,-5 ZUO,23,190078,-4 SDC,18,58711,-1 MORF,21,406257,2 ERF,18,169795,0 Average,18.4,179942,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $904 million in BSIG's case. Zuora, Inc. (NYSE:ZUO) is the most popular stock in this table. On the other hand Myovant Sciences Ltd. (NYSE:MYOV) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks BrightSphere Investment Group Inc (NYSE:BSIG) is more popular among hedge funds. Our overall hedge fund sentiment score for BSIG is 86. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, BSIG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BSIG were disappointed as the stock returned -17.4% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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