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Hedge Funds Are Dumping BlackBerry Limited (BB)

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards BlackBerry Limited (NYSE:BB).

BlackBerry Limited (NYSE:BB) has experienced a decrease in hedge fund interest recently. BlackBerry Limited (NYSE:BB) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistic is 31. There were 24 hedge funds in our database with BB positions at the end of the first quarter. Our calculations also showed that BB isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 79 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.

Irving Kahn
Irving Kahn

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a glance at the fresh hedge fund action surrounding BlackBerry Limited (NYSE:BB).

Do Hedge Funds Think BB Is A Good Stock To Buy Now?

Heading into the third quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in BB a year ago. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is BB A Good Stock To Buy?
Is BB A Good Stock To Buy?

Among these funds, Fairfax Financial Holdings held the most valuable stake in BlackBerry Limited (NYSE:BB), which was worth $571 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $33.3 million worth of shares. D E Shaw, Kahn Brothers, and Citadel Investment Group 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 Fairfax Financial Holdings allocated the biggest weight to BlackBerry Limited (NYSE:BB), around 18.37% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, setting aside 3.08 percent of its 13F equity portfolio to BB.

Since BlackBerry Limited (NYSE:BB) has faced bearish sentiment from the smart money, it's safe to say that there was a specific group of hedge funds who sold off their entire stakes heading into Q3. It's worth mentioning that Joseph Samuels's Islet Management sold off the largest position of the "upper crust" of funds watched by Insider Monkey, totaling about $9.3 million in stock, and Peter Muller's PDT Partners was right behind this move, as the fund dumped about $2.6 million worth. These transactions are interesting, as total hedge fund interest was cut by 4 funds heading into Q3.

Let's check out hedge fund activity in other stocks similar to BlackBerry Limited (NYSE:BB). We will take a look at Leggett & Platt, Inc. (NYSE:LEG), Post Holdings Inc (NYSE:POST), Bumble Inc. (NASDAQ:BMBL), Fastly, Inc. (NYSE:FSLY), Boyd Gaming Corporation (NYSE:BYD), Alcoa Corporation (NYSE:AA), and Dada Nexus Limited (NASDAQ:DADA). This group of stocks' market valuations are similar to BB's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LEG,14,106360,-10 POST,31,1514333,-2 BMBL,23,299269,-6 FSLY,24,1140190,-2 BYD,36,534864,14 AA,44,1155642,6 DADA,18,160572,-3 Average,27.1,701604,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $702 million. That figure was $732 million in BB's case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Leggett & Platt, Inc. (NYSE:LEG) is the least popular one with only 14 bullish hedge fund positions. BlackBerry Limited (NYSE:BB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BB is 30.4. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately BB wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BB investors were disappointed as the stock returned -10.6% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.