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 second 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 5 years and analyze what the smart money thinks of Belden Inc. (NYSE:BDC) based on that data and determine whether they were really smart about the stock.
Belden Inc. (NYSE:BDC) has experienced an increase in support from the world's most elite money managers in recent months. Belden Inc. (NYSE:BDC) was in 19 hedge funds' portfolios at the end of June. The all time high for this statistics is 22. Our calculations also showed that BDC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by 58 percentage points since March 2017 (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.
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let's analyze the recent hedge fund action encompassing Belden Inc. (NYSE:BDC).
What does smart money think about Belden Inc. (NYSE:BDC)?
At second quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in BDC over the last 20 quarters. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Among these funds, Pzena Investment Management held the most valuable stake in Belden Inc. (NYSE:BDC), which was worth $38.4 million at the end of the third quarter. On the second spot was D E Shaw which amassed $14.4 million worth of shares. Arrowstreet Capital, Millennium Management, and AQR Capital Management 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 Invenomic Capital Management allocated the biggest weight to Belden Inc. (NYSE:BDC), around 0.99% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, dishing out 0.27 percent of its 13F equity portfolio to BDC.
As one would reasonably expect, specific money managers were breaking ground themselves. Engineers Gate Manager, managed by Greg Eisner, initiated the most valuable position in Belden Inc. (NYSE:BDC). Engineers Gate Manager had $0.8 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Minhua Zhang's Weld Capital Management, and Michael Gelband's ExodusPoint Capital.
Let's check out hedge fund activity in other stocks similar to Belden Inc. (NYSE:BDC). We will take a look at Resideo Technologies, Inc. (NYSE:REZI), Beam Therapeutics Inc. (NASDAQ:BEAM), So-Young International Inc. (NASDAQ:SY), Rush Enterprises, Inc. (NASDAQ:RUSHB), Addus Homecare Corporation (NASDAQ:ADUS), Patrick Industries, Inc. (NASDAQ:PATK), and Range Resources Corp. (NYSE:RRC). This group of stocks' market caps match BDC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position REZI,20,367520,-5 BEAM,10,238351,-1 SY,7,16753,1 RUSHB,4,30427,1 ADUS,19,67991,4 PATK,15,99917,2 RRC,23,300565,0 Average,14,160218,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $89 million in BDC's case. Range Resources Corp. (NYSE:RRC) is the most popular stock in this table. On the other hand Rush Enterprises, Inc. (NASDAQ:RUSHB) is the least popular one with only 4 bullish hedge fund positions. Belden Inc. (NYSE:BDC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BDC is 75.4. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately BDC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BDC were disappointed as the stock returned -4.2% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.