Reputable billionaire investors such as Jim Simons, Cliff Asness and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won't accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is Ball Corporation (NYSE:BLL) a first-rate investment right now? Money managers are reducing their bets on the stock. The number of long hedge fund positions were trimmed by 6 in recent months. Our calculations also showed that BLL isn't among the 30 most popular stocks among hedge funds. BLL was in 27 hedge funds' portfolios at the end of March. There were 33 hedge funds in our database with BLL 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a peek at the recent hedge fund action regarding Ball Corporation (NYSE:BLL).
What does the smart money think about Ball Corporation (NYSE:BLL)?
At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards BLL over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Rivulet Capital held the most valuable stake in Ball Corporation (NYSE:BLL), which was worth $86.5 million at the end of the first quarter. On the second spot was Select Equity Group which amassed $65.8 million worth of shares. Moreover, Brookside Capital, PEAK6 Capital Management, and MD Sass were also bullish on Ball Corporation (NYSE:BLL), allocating a large percentage of their portfolios to this stock.
Due to the fact that Ball Corporation (NYSE:BLL) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of fund managers that decided to sell off their positions entirely last quarter. At the top of the heap, Richard Chilton's Chilton Investment Company sold off the largest investment of the 700 funds monitored by Insider Monkey, valued at close to $146.5 million in stock. David Cohen and Harold Levy's fund, Iridian Asset Management, also sold off its stock, about $125.7 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 6 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Ball Corporation (NYSE:BLL) but similarly valued. We will take a look at Sasol Limited (NYSE:SSL), IDEXX Laboratories, Inc. (NASDAQ:IDXX), Credicorp Ltd. (NYSE:BAP), and Newmont Goldcorp Corporation (NYSE:NEM). This group of stocks' market valuations are similar to BLL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SSL,5,18378,-2 IDXX,29,695512,-4 BAP,20,762470,6 NEM,35,787316,4 Average,22.25,565919,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $566 million. That figure was $324 million in BLL's case. Newmont Goldcorp Corporation (NYSE:NEM) is the most popular stock in this table. On the other hand Sasol Limited (NYSE:SSL) is the least popular one with only 5 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on BLL as the stock returned 5.5% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.