Did Hedge Funds Drop The Ball On BRP Inc. (DOOO) ?
Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of BRP Inc. (NASDAQ:DOOO).
BRP Inc. (NASDAQ:DOOO) has seen a decrease in hedge fund sentiment lately. DOOO was in 10 hedge funds' portfolios at the end of the first quarter of 2019. There were 11 hedge funds in our database with DOOO positions at the end of the previous quarter. Our calculations also showed that DOOO isn't among the 30 most popular stocks among hedge funds.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_745225" align="aligncenter" width="473"]
Noam Gottesman, GLG Partners[/caption]
We're going to take a peek at the recent hedge fund action surrounding BRP Inc. (NASDAQ:DOOO).
Hedge fund activity in BRP Inc. (NASDAQ:DOOO)
Heading into the second quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in DOOO 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.
According to Insider Monkey's hedge fund database, Cliff Asness's AQR Capital Management has the most valuable position in BRP Inc. (NASDAQ:DOOO), worth close to $44.8 million, corresponding to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $21.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism consist of Paul Marshall and Ian Wace's Marshall Wace LLP, Noam Gottesman's GLG Partners and D. E. Shaw's D E Shaw.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Islet Management. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified DOOO as a viable investment and initiated a position in the stock.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as BRP Inc. (NASDAQ:DOOO) but similarly valued. We will take a look at Coca-Cola Consolidated, Inc. (NASDAQ:COKE), The Ensign Group, Inc. (NASDAQ:ENSG), Spectrum Brands Holdings, Inc. (NYSE:SPB), and Tellurian Inc. (NASDAQ:TELL). This group of stocks' market caps match DOOO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COKE,9,8866,2 ENSG,17,83609,-1 SPB,22,837403,-3 TELL,16,125497,1 Average,16,263844,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $264 million. That figure was $112 million in DOOO's case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand Coca-Cola Consolidated, Inc. (NASDAQ:COKE) is the least popular one with only 9 bullish hedge fund positions. BRP Inc. (NASDAQ:DOOO) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on DOOO as the stock returned 28.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
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