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The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought BGC Partners, Inc. (NASDAQ:BGCP) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Is BGC Partners, Inc. (NASDAQ:BGCP) a superb investment right now? Prominent investors were becoming less hopeful. The number of long hedge fund positions were trimmed by 3 in recent months. BGC Partners, Inc. (NASDAQ:BGCP) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistics is 31. Our calculations also showed that BGCP isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now let's go over the fresh hedge fund action regarding BGC Partners, Inc. (NASDAQ:BGCP).
How have hedgies been trading BGC Partners, Inc. (NASDAQ:BGCP)?
At second quarter's end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BGCP over the last 20 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Cardinal Capital was the largest shareholder of BGC Partners, Inc. (NASDAQ:BGCP), with a stake worth $40.3 million reported as of the end of September. Trailing Cardinal Capital was Point72 Asset Management, which amassed a stake valued at $25.4 million. Alyeska Investment Group, Rubric Capital Management, and D E Shaw 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 Cardinal Capital allocated the biggest weight to BGC Partners, Inc. (NASDAQ:BGCP), around 1.68% of its 13F portfolio. Rubric Capital Management is also relatively very bullish on the stock, setting aside 1.34 percent of its 13F equity portfolio to BGCP.
Since BGC Partners, Inc. (NASDAQ:BGCP) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few hedge funds who sold off their positions entirely in the second quarter. Interestingly, Bill Miller's Miller Value Partners dumped the largest position of all the hedgies watched by Insider Monkey, valued at close to $2.2 million in stock. David Rodriguez-Fraile's fund, BlueMar Capital Management, also dropped its stock, about $1.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds in the second quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as BGC Partners, Inc. (NASDAQ:BGCP) but similarly valued. We will take a look at Virtusa Corporation (NASDAQ:VRTU), Ladder Capital Corp (NYSE:LADR), National HealthCare Corporation (NYSE:NHC), Eventbrite, Inc. (NYSE:EB), Kite Realty Group Trust (NYSE:KRG), Purple Innovation, Inc. (NASDAQ:PRPL), and Chase Corporation (NYSE:CCF). This group of stocks' market values are similar to BGCP's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRTU,13,42958,0 LADR,14,30439,-3 NHC,11,53559,0 EB,20,161530,-5 KRG,10,42099,2 PRPL,28,359302,14 CCF,12,89293,2 Average,15.4,111311,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $111 million. That figure was $133 million in BGCP's case. Purple Innovation, Inc. (NASDAQ:PRPL) is the most popular stock in this table. On the other hand Kite Realty Group Trust (NYSE:KRG) is the least popular one with only 10 bullish hedge fund positions. BGC Partners, Inc. (NASDAQ:BGCP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BGCP is 79.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately BGCP wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BGCP were disappointed as the stock returned -14.3% 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.