There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze BBX Capital Corporation (NYSE:BBX).
Is BBX Capital Corporation (NYSE:BBX) undervalued? Prominent investors are getting more bullish. The number of bullish hedge fund positions inched up by 1 in recent months. Our calculations also showed that bbx isn't among the 30 most popular stocks among hedge funds. BBX was in 16 hedge funds' portfolios at the end of March. There were 15 hedge funds in our database with BBX positions at the end of the previous quarter.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Let's take a gander at the latest hedge fund action surrounding BBX Capital Corporation (NYSE:BBX).
How are hedge funds trading BBX Capital Corporation (NYSE:BBX)?
At the end of the first quarter, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards BBX over the last 15 quarters. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, John M. Angelo and Michael L. Gordon's Angelo Gordon & Co has the biggest position in BBX Capital Corporation (NYSE:BBX), worth close to $13 million, accounting for 1.2% of its total 13F portfolio. On Angelo Gordon & Co's heels is Renaissance Technologies, managed by Jim Simons, which holds a $6.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise Bradley LouisáRadoff's Fondren Management, Jeremy Carton and Gilbert Li's Alta Fundamental Advisers and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.
Now, key hedge funds were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the largest position in BBX Capital Corporation (NYSE:BBX). Marshall Wace LLP had $0.4 million invested in the company at the end of the quarter. David Harding's Winton Capital Management also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's now review hedge fund activity in other stocks similar to BBX Capital Corporation (NYSE:BBX). These stocks are William Lyon Homes (NYSE:WLH), SunCoke Energy Partners LP (NYSE:SXCP), Calyxt, Inc. (NASDAQ:CLXT), and MYR Group Inc (NASDAQ:MYRG). This group of stocks' market values resemble BBX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WLH,23,139014,3 SXCP,5,5850,0 CLXT,3,13275,-2 MYRG,15,27561,3 Average,11.5,46425,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $43 million in BBX's case. William Lyon Homes (NYSE:WLH) is the most popular stock in this table. On the other hand Calyxt, Inc. (NASDAQ:CLXT) is the least popular one with only 3 bullish hedge fund positions. BBX Capital Corporation (NYSE:BBX) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BBX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BBX were disappointed as the stock returned -25.8% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.