We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Ball Corporation (NYSE:BLL).
Is Ball Corporation (NYSE:BLL) a buy here? Investors who are in the know are turning bullish. The number of bullish hedge fund positions advanced by 1 lately. Our calculations also showed that BLL 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_746830" align="aligncenter" width="1613"] Matthew Hulsizer of PEAK6 Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to go over the recent hedge fund action regarding Ball Corporation (NYSE:BLL).
How are hedge funds trading Ball Corporation (NYSE:BLL)?
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BLL over the last 17 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
The largest stake in Ball Corporation (NYSE:BLL) was held by Chilton Investment Company, which reported holding $219.2 million worth of stock at the end of September. It was followed by Iridian Asset Management with a $150.6 million position. Other investors bullish on the company included Two Sigma Advisors, PEAK6 Capital Management, and Adage Capital Management. In terms of the portfolio weights assigned to each position Chilton Investment Company allocated the biggest weight to Ball Corporation (NYSE:BLL), around 7.32% of its portfolio. Thames Capital Management is also relatively very bullish on the stock, setting aside 2.92 percent of its 13F equity portfolio to BLL.
Consequently, specific money managers were leading the bulls' herd. Adage Capital Management, managed by Phill Gross and Robert Atchinson, established the most outsized position in Ball Corporation (NYSE:BLL). Adage Capital Management had $25.5 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $4.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones's Tudor Investment Corp, Matthew Tewksbury's Stevens Capital Management, and Karim Abbadi and Edward McBride's Centiva Capital.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Ball Corporation (NYSE:BLL) but similarly valued. We will take a look at Baker Hughes, a GE company (NYSE:BHGE), Agilent Technologies Inc. (NYSE:A), IDEXX Laboratories, Inc. (NASDAQ:IDXX), and Hormel Foods Corporation (NYSE:HRL). This group of stocks' market valuations match BLL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BHGE,33,954876,15 A,37,1857520,-2 IDXX,29,509187,-8 HRL,19,190410,3 Average,29.5,877998,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $878 million. That figure was $556 million in BLL's case. Agilent Technologies Inc. (NYSE:A) is the most popular stock in this table. On the other hand Hormel Foods Corporation (NYSE:HRL) is the least popular one with only 19 bullish hedge fund positions. Ball Corporation (NYSE:BLL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately BLL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BLL investors were disappointed as the stock returned -9.1% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.