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Hedge Funds Started Cashing Out Of Ball Corporation (BLL)

Abigail Fisher

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Ball Corporation (NYSE:BLL) based on that data.

Is Ball Corporation (NYSE:BLL) a worthy investment now? The best stock pickers are in a bearish mood. The number of bullish hedge fund positions were trimmed by 3 in recent months. Our calculations also showed that BLL 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). BLL was in 41 hedge funds' portfolios at the end of March. There were 44 hedge funds in our database with BLL holdings at the end of the previous quarter. 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 44 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_338182" align="aligncenter" width="399"] Harold Levy of Iridian Asset Management[/caption]

Harold Levy Iridian Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a gander at the recent hedge fund action regarding Ball Corporation (NYSE:BLL).

How have hedgies been trading Ball Corporation (NYSE:BLL)?

Heading into the second quarter of 2020, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BLL over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Chilton Investment Company was the largest shareholder of Ball Corporation (NYSE:BLL), with a stake worth $200.1 million reported as of the end of September. Trailing Chilton Investment Company was Iridian Asset Management, which amassed a stake valued at $136.1 million. Two Sigma Advisors, Select Equity Group, and MIG Capital 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 SAYA Management allocated the biggest weight to Ball Corporation (NYSE:BLL), around 11.28% of its 13F portfolio. Chilton Investment Company is also relatively very bullish on the stock, dishing out 7.58 percent of its 13F equity portfolio to BLL.

Judging by the fact that Ball Corporation (NYSE:BLL) has experienced declining sentiment from the smart money, logic holds that there was a specific group of money managers that elected to cut their full holdings heading into Q4. Interestingly, Clint Carlson's Carlson Capital cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, valued at close to $32.3 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dumped about $24.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 3 funds heading into Q4.

Let's check out hedge fund activity in other stocks similar to Ball Corporation (NYSE:BLL). These stocks are CRH PLC (NYSE:CRH), TE Connectivity Ltd. (NYSE:TEL), American International Group Inc (NYSE:AIG), and Verisign, Inc. (NASDAQ:VRSN). This group of stocks' market values are closest to BLL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRH,10,131812,5 TEL,33,1381411,-11 AIG,43,1473892,-9 VRSN,41,5645444,3 Average,31.75,2158140,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $2158 million. That figure was $698 million in BLL's case. American International Group Inc (NYSE:AIG) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 10 bullish hedge fund positions. Ball Corporation (NYSE:BLL) 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 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately BLL wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BLL were disappointed as the stock returned 10.4% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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