Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. At Insider Monkey, we pore over the filings of nearly 835 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not BlackBerry Limited (NYSE:BB) makes for a good investment right now.
BlackBerry Limited (NYSE:BB) investors should be aware of a decrease in hedge fund sentiment recently. BB was in 27 hedge funds' portfolios at the end of December. There were 30 hedge funds in our database with BB positions at the end of the previous quarter. Our calculations also showed that BB isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_255018" align="aligncenter" width="399"] Prem Watsa of Fairfax Financial Holdings[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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. With all of this in mind let's take a gander at the recent hedge fund action surrounding BlackBerry Limited (NYSE:BB).
How have hedgies been trading BlackBerry Limited (NYSE:BB)?
At Q4's end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BB over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Prem Watsa's Fairfax Financial Holdings has the largest position in BlackBerry Limited (NYSE:BB), worth close to $300 million, comprising 11.8% of its total 13F portfolio. On Fairfax Financial Holdings's heels is David Cohen and Harold Levy of Iridian Asset Management, with a $55.3 million position; 0.9% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism consist of Kahn Brothers, D. E. Shaw's D E Shaw and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Fairfax Financial Holdings allocated the biggest weight to BlackBerry Limited (NYSE:BB), around 11.82% of its 13F portfolio. Scion Asset Management is also relatively very bullish on the stock, dishing out 7.02 percent of its 13F equity portfolio to BB.
Judging by the fact that BlackBerry Limited (NYSE:BB) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there was a specific group of hedgies that slashed their full holdings heading into Q4. Interestingly, Francis Chou's Chou Associates Management sold off the largest investment of the 750 funds monitored by Insider Monkey, totaling about $2.8 million in stock, and Marc Majzner's Clearline Capital was right behind this move, as the fund dropped about $2.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q4.
Let's go over hedge fund activity in other stocks similar to BlackBerry Limited (NYSE:BB). We will take a look at Liberty Latin America Ltd. (NASDAQ:LILAK), Cameco Corporation (NYSE:CCJ), Tandem Diabetes Care Inc (NASDAQ:TNDM), and Associated Banc Corp (NYSE:ASB). This group of stocks' market caps resemble BB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LILAK,21,443479,-1 CCJ,28,329012,3 TNDM,39,518462,2 ASB,24,191911,1 Average,28,370716,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $371 million. That figure was $471 million in BB's case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Liberty Latin America Ltd. (NASDAQ:LILAK) is the least popular one with only 21 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. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately BB wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BB investors were disappointed as the stock returned -41.4% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.