We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Ballard Power Systems Inc. (NASDAQ:BLDP).
Ballard Power Systems Inc. (NASDAQ:BLDP) investors should be aware of an increase in hedge fund sentiment in recent months. Our calculations also showed that BLDP isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's check out the key hedge fund action surrounding Ballard Power Systems Inc. (NASDAQ:BLDP).
How are hedge funds trading Ballard Power Systems Inc. (NASDAQ:BLDP)?
At Q2's end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the previous quarter. By comparison, 5 hedge funds held shares or bullish call options in BLDP a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, Manatuck Hill Partners, managed by Mark Broach, holds the largest position in Ballard Power Systems Inc. (NASDAQ:BLDP). Manatuck Hill Partners has a $0.3 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $0.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism include Michael Gelband's ExodusPoint Capital, and Israel Englander's Millennium Management.
With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, initiated the biggest position in Ballard Power Systems Inc. (NASDAQ:BLDP). ExodusPoint Capital had $0.1 million invested in the company at the end of the quarter.
Let's go over hedge fund activity in other stocks similar to Ballard Power Systems Inc. (NASDAQ:BLDP). These stocks are ATN International, Inc. (NASDAQ:ATNI), U.S. Silica Holdings Inc (NYSE:SLCA), SemGroup Corporation (NYSE:SEMG), and i3 Verticals, Inc. (NASDAQ:IIIV). This group of stocks' market caps are similar to BLDP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATNI,9,61868,-1 SLCA,17,281845,3 SEMG,15,65133,2 IIIV,13,71699,5 Average,13.5,120136,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $120 million. That figure was $1 million in BLDP's case. U.S. Silica Holdings Inc (NYSE:SLCA) is the most popular stock in this table. On the other hand ATN International, Inc. (NASDAQ:ATNI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Ballard Power Systems Inc. (NASDAQ:BLDP) is even less popular than ATNI. Hedge funds clearly dropped the ball on BLDP as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on BLDP as the stock returned 19.9% during the third quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.