In this article we will check out the progression of hedge fund sentiment towards Belden Inc. (NYSE:BDC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Belden Inc. (NYSE:BDC) a cheap investment right now? Money managers are taking an optimistic view. The number of long hedge fund bets inched up by 2 recently. Our calculations also showed that BDC 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). BDC was in 14 hedge funds' portfolios at the end of the first quarter of 2020. There were 12 hedge funds in our database with BDC holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_338852" align="aligncenter" width="400"] Richard S. Pzena of Pzena Investment Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 largest producers of bauxite to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a gander at the recent hedge fund action surrounding Belden Inc. (NYSE:BDC).
How are hedge funds trading Belden Inc. (NYSE:BDC)?
Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BDC over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pzena Investment Management was the largest shareholder of Belden Inc. (NYSE:BDC), with a stake worth $31.2 million reported as of the end of September. Trailing Pzena Investment Management was D E Shaw, which amassed a stake valued at $7.6 million. Arrowstreet Capital, Renaissance Technologies, and Invenomic Capital Management 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 Invenomic Capital Management allocated the biggest weight to Belden Inc. (NYSE:BDC), around 1.22% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, setting aside 0.24 percent of its 13F equity portfolio to BDC.
Consequently, key hedge funds have been driving this bullishness. Pzena Investment Management, managed by Richard S. Pzena, assembled the most outsized position in Belden Inc. (NYSE:BDC). Pzena Investment Management had $31.2 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $1 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management and Israel Englander's Millennium Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Belden Inc. (NYSE:BDC) but similarly valued. These stocks are Evertec Inc (NYSE:EVTC), Capitol Federal Financial, Inc. (NASDAQ:CFFN), CONMED Corporation (NASDAQ:CNMD), and Acadia Healthcare Company Inc (NASDAQ:ACHC). All of these stocks' market caps are closest to BDC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EVTC,19,197628,0 CFFN,11,108700,-5 CNMD,29,207132,-2 ACHC,24,272616,-4 Average,20.75,196519,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $53 million in BDC's case. CONMED Corporation (NASDAQ:CNMD) is the most popular stock in this table. On the other hand Capitol Federal Financial, Inc. (NASDAQ:CFFN) is the least popular one with only 11 bullish hedge fund positions. Belden Inc. (NYSE:BDC) 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 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 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately BDC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BDC investors were disappointed as the stock returned -12.5% during the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.