It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' stock picks generate superior risk-adjusted returns. 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 Bruker Corporation (NASDAQ:BRKR).
Is Bruker Corporation (NASDAQ:BRKR) a buy right now? Hedge funds are getting more bullish. The number of bullish hedge fund bets improved by 2 lately. Overall hedge fund sentiment towards the stock currently sits at its all time high. This is usually a bullish sign. For example hedge fund positions in Xerox jumped to its all time high by the end of December and the stock returned more than 72% in the following 3 months or so. Another example is Xilinx. Hedge fund sentiment towards the stock was also at its all time high at the beginning of this year and the stock returned more than 46% in 2.5 months. Similarly EEFT returned more than 40% after hedge fund sentiment hit its all time high at the end of December. We observed similar performances from OKTA, Twilio, CCK, MSCI, MASI and Progressive Corporation (PGR); these stocks returned 37%, 37%, 35%, 29%, 28% and 27% respectively. Hedge fund sentiment towards IQVIA Holdings Inc. (IQV), Brookfield Asset Management (BAM), Atlassian Corporation (TEAM), RCL, MTB, VAR, RNG, FIVE, ECA, SBNY, KL and CRH also hit all time highs at the end of December, and all of these stocks returned more than 20% in the first 2.5-3 months of this year.
If you'd ask most investors, hedge funds are assumed to be slow, outdated financial vehicles of years past. While there are over 8000 funds with their doors open at the moment, Our experts look at the masters of this group, approximately 750 funds. It is estimated that this group of investors manage the majority of the hedge fund industry's total asset base, and by monitoring their first-class investments, Insider Monkey has deciphered many investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let's take a look at the key hedge fund action surrounding Bruker Corporation (NASDAQ:BRKR).
How are hedge funds trading Bruker Corporation (NASDAQ:BRKR)?
At the end of the fourth quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BRKR over the last 14 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.
According to Insider Monkey's hedge fund database, D E Shaw holds the most valuable position in Bruker Corporation (NASDAQ:BRKR). D E Shaw has a $63.5 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which holds a $62.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Paul Marshall and Ian Wace's Marshall Wace LLP, Steve Cohen's Point72 Asset Management and Ken Griffin's Citadel Investment Group.
Now, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, initiated the most outsized position in Bruker Corporation (NASDAQ:BRKR). Point72 Asset Management had $39.3 million invested in the company at the end of the quarter. Simon Sadler's Segantii Capital also initiated a $7 million position during the quarter. The other funds with brand new BRKR positions are Benjamin A. Smith's Laurion Capital Management, Ray Dalio's Bridgewater Associates, and Peter Algert and Kevin Coldiron's Algert Coldiron Investors.
Let's also examine hedge fund activity in other stocks similar to Bruker Corporation (NASDAQ:BRKR). These stocks are Brookfield Renewable Partners L.P. (NYSE:BEP), Itau CorpBanca (NYSE:ITCB), Compania Cervecerias Unidas S.A. (NYSE:CCU), and Grand Canyon Education Inc (NASDAQ:LOPE). This group of stocks' market valuations are closest to BRKR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BEP,3,8243,1 ITCB,1,4355,0 CCU,9,77238,-5 LOPE,21,212337,-3 Average,8.5,75543,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $325 million in BRKR's case. Grand Canyon Education Inc (NASDAQ:LOPE) is the most popular stock in this table. On the other hand Itau CorpBanca (NYSE:ITCB) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Bruker Corporation (NASDAQ:BRKR) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on BRKR as the stock returned 30.6% and outperformed the market as well. It seems like hedge funds piled into BRKR at the right time.
Disclosure: None. This article was originally published at Insider Monkey.