We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Global Brass and Copper Holdings Inc (NYSE:BRSS).
Is Global Brass and Copper Holdings Inc (NYSE:BRSS) a sound investment today? Hedge funds are in an optimistic mood. The number of bullish hedge fund bets moved up by 3 in recent months. Our calculations also showed that BRSS isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
[caption id="attachment_30621" align="aligncenter" width="487"] Cliff Asness of AQR Capital Management[/caption]
We're going to analyze the latest hedge fund action encompassing Global Brass and Copper Holdings Inc (NYSE:BRSS).
How are hedge funds trading Global Brass and Copper Holdings Inc (NYSE:BRSS)?
Heading into the fourth quarter of 2018, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the second quarter of 2018. By comparison, 13 hedge funds held shares or bullish call options in BRSS heading into this year. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Global Brass and Copper Holdings Inc (NYSE:BRSS), with a stake worth $49.7 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $13.2 million. GLG Partners, D E Shaw, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Now, key money managers have jumped into Global Brass and Copper Holdings Inc (NYSE:BRSS) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the largest position in Global Brass and Copper Holdings Inc (NYSE:BRSS). PEAK6 Capital Management had $0.8 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also made a $0.5 million investment in the stock during the quarter. The other funds with brand new BRSS positions are Jeffrey Talpins's Element Capital Management, Mike Vranos's Ellington, and Roger Ibbotson's Zebra Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Global Brass and Copper Holdings Inc (NYSE:BRSS) but similarly valued. We will take a look at Myers Industries, Inc. (NYSE:MYE), Briggs & Stratton Corporation (NYSE:BGG), Virtus Investment Partners Inc (NASDAQ:VRTS), and Monarch Casino & Resort, Inc. (NASDAQ:MCRI). All of these stocks' market caps resemble BRSS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MYE,8,124367,-5 BGG,15,24066,4 VRTS,13,87596,1 MCRI,10,140921,-1 Average,11.5,94238,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $85 million in BRSS's case. Briggs & Stratton Corporation (NYSE:BGG) is the most popular stock in this table. On the other hand Myers Industries, Inc. (NYSE:MYE) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Global Brass and Copper Holdings Inc (NYSE:BRSS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.