The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 37.4% through the end of November, vs. a gain of 27.5% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Bloomin' Brands Inc (NASDAQ:BLMN), and what that likely means for the prospects of the company and its stock.
Bloomin' Brands Inc (NASDAQ:BLMN) investors should be aware of a decrease in support from the world's most elite money managers of late. BLMN was in 18 hedge funds' portfolios at the end of September. There were 22 hedge funds in our database with BLMN positions at the end of the previous quarter. Our calculations also showed that BLMN isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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_30594" align="aligncenter" width="473"] Barry Rosenstein of JANA Partners[/caption]
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. 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 also rely on the best performing hedge funds' buy/sell signals. We're going to go over the recent hedge fund action surrounding Bloomin' Brands Inc (NASDAQ:BLMN).
How are hedge funds trading Bloomin' Brands Inc (NASDAQ:BLMN)?
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BLMN over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Barry Rosenstein's JANA Partners has the number one position in Bloomin' Brands Inc (NASDAQ:BLMN), worth close to $148 million, accounting for 11.9% of its total 13F portfolio. Coming in second is 13D Management, led by Kenneth Squire, holding a $13.8 million position; 4.5% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that hold long positions consist of Israel Englander's Millennium Management, Noam Gottesman's GLG Partners and David E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position JANA Partners allocated the biggest weight to Bloomin' Brands Inc (NASDAQ:BLMN), around 11.93% of its 13F portfolio. 13D Management is also relatively very bullish on the stock, setting aside 4.54 percent of its 13F equity portfolio to BLMN.
Because Bloomin' Brands Inc (NASDAQ:BLMN) has experienced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of fund managers that slashed their entire stakes by the end of the third quarter. It's worth mentioning that Dmitry Balyasny's Balyasny Asset Management said goodbye to the biggest position of the "upper crust" of funds tracked by Insider Monkey, comprising an estimated $5.7 million in stock. Sara Nainzadeh's fund, Centenus Global Management, also dropped its stock, about $2.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to Bloomin' Brands Inc (NASDAQ:BLMN). We will take a look at Provident Financial Services, Inc. (NYSE:PFS), Mueller Industries, Inc. (NYSE:MLI), Comfort Systems USA, Inc. (NYSE:FIX), and InterDigital, Inc. (NASDAQ:IDCC). This group of stocks' market valuations resemble BLMN's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFS,11,55738,0 MLI,18,185815,3 FIX,21,124284,-2 IDCC,23,224163,7 Average,18.25,147500,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $251 million in BLMN's case. InterDigital, Inc. (NASDAQ:IDCC) is the most popular stock in this table. On the other hand Provident Financial Services, Inc. (NYSE:PFS) is the least popular one with only 11 bullish hedge fund positions. Bloomin' Brands Inc (NASDAQ:BLMN) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on BLMN as the stock returned 27.6% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.