Hedge Funds Are Dumping Big Rock Partners Acquisition Corp. (BRPA)
The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Big Rock Partners Acquisition Corp. (NASDAQ:BRPA).
Is Big Rock Partners Acquisition Corp. (NASDAQ:BRPA) a buy here? Money managers are taking a bearish view. The number of bullish hedge fund positions decreased by 2 in recent months. Our calculations also showed that BRPA isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
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 S&P 500 ETFs by more than 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_735677" align="aligncenter" width="400"]
Sander Gerber of Hudson Bay Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's review the latest hedge fund action surrounding Big Rock Partners Acquisition Corp. (NASDAQ:BRPA).
How are hedge funds trading Big Rock Partners Acquisition Corp. (NASDAQ:BRPA)?
At Q1's end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BRPA over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Alec Litowitz and Ross Laser's Magnetar Capital has the largest position in Big Rock Partners Acquisition Corp. (NASDAQ:BRPA), worth close to $1.9 million, amounting to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Hudson Bay Capital Management, led by Sander Gerber, holding a $0 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions contain Ari Zweiman's 683 Capital Partners, Michael Platt and William Reeves's BlueCrest Capital Mgmt. and Paul Glazer's Glazer Capital. In terms of the portfolio weights assigned to each position Magnetar Capital allocated the biggest weight to Big Rock Partners Acquisition Corp. (NASDAQ:BRPA), around 0.05% of its 13F portfolio. Bulldog Investors is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to BRPA.
Since Big Rock Partners Acquisition Corp. (NASDAQ:BRPA) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of hedgies that decided to sell off their full holdings last quarter. Interestingly, John Thiessen's Vertex One Asset Management dumped the largest position of all the hedgies watched by Insider Monkey, valued at an estimated $1.1 million in stock, and Andrew Weiss's Weiss Asset Management was right behind this move, as the fund sold off about $0.9 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Big Rock Partners Acquisition Corp. (NASDAQ:BRPA) but similarly valued. These stocks are Kingstone Companies Inc (NASDAQ:KINS), Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX), Trevena Inc (NASDAQ:TRVN), and Strattec Security Corp. (NASDAQ:STRT). This group of stocks' market values are similar to BRPA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KINS,4,4606,-1 CPIX,3,8943,0 TRVN,4,1874,-1 STRT,4,9062,0 Average,3.75,6121,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $2 million in BRPA's case. Kingstone Companies Inc (NASDAQ:KINS) is the most popular stock in this table. On the other hand Cumberland Pharmaceuticals, Inc. (NASDAQ:CPIX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Big Rock Partners Acquisition Corp. (NASDAQ:BRPA) is more popular among hedge funds. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. Unfortunately BRPA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BRPA were disappointed as the stock returned 2.1% during the second quarter (through June 10th) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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