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Here is What Hedge Funds Think About BorgWarner Inc. (BWA)

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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2020. What do these smart investors think about BorgWarner Inc. (NYSE:BWA)?

BorgWarner Inc. (NYSE:BWA) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 27 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that BWA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Zynga Inc (NASDAQ:ZNGA), Dropbox, Inc. (NASDAQ:DBX), and Cable One Inc (NYSE:CABO) to gather more data points.

If you'd ask most stock holders, hedge funds are seen as slow, outdated financial tools of years past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the moguls of this club, about 850 funds. These money managers manage most of the hedge fund industry's total asset base, and by paying attention to their matchless picks, Insider Monkey has formulated a few investment strategies that have historically defeated the market. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

BRIDGEWATER ASSOCIATES
BRIDGEWATER ASSOCIATES

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to check out the latest hedge fund action encompassing BorgWarner Inc. (NYSE:BWA).

Do Hedge Funds Think BWA Is A Good Stock To Buy Now?

At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. On the other hand, there were a total of 30 hedge funds with a bullish position in BWA a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BWA A Good Stock To Buy?
Is BWA A Good Stock To Buy?

More specifically, Diamond Hill Capital was the largest shareholder of BorgWarner Inc. (NYSE:BWA), with a stake worth $370 million reported as of the end of March. Trailing Diamond Hill Capital was Ariel Investments, which amassed a stake valued at $73.6 million. AQR Capital Management, GAMCO Investors, and Bridgewater Associates 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 Mountaineer Partners Management allocated the biggest weight to BorgWarner Inc. (NYSE:BWA), around 6.22% of its 13F portfolio. Cumberland Associates / Springowl Associates is also relatively very bullish on the stock, designating 3.39 percent of its 13F equity portfolio to BWA.

Judging by the fact that BorgWarner Inc. (NYSE:BWA) has experienced falling interest from hedge fund managers, we can see that there is a sect of funds that decided to sell off their full holdings by the end of the first quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the biggest stake of all the hedgies tracked by Insider Monkey, worth an estimated $29.6 million in stock. D. E. Shaw's fund, D E Shaw, also dumped its stock, about $21.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks similar to BorgWarner Inc. (NYSE:BWA). We will take a look at Zynga Inc (NASDAQ:ZNGA), Dropbox, Inc. (NASDAQ:DBX), Cable One Inc (NYSE:CABO), Camden Property Trust (NYSE:CPT), Essential Utilities Inc (NYSE:WTRG), A. O. Smith Corporation (NYSE:AOS), and Apollo Global Management Inc (NYSE:APO). All of these stocks' market caps are closest to BWA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZNGA,47,1143096,-5 DBX,31,775813,-12 CABO,23,694559,6 CPT,24,614554,-2 WTRG,19,266338,6 AOS,24,420942,-7 APO,44,2362179,14 Average,30.3,896783,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.3 hedge funds with bullish positions and the average amount invested in these stocks was $897 million. That figure was $591 million in BWA's case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Essential Utilities Inc (NYSE:WTRG) is the least popular one with only 19 bullish hedge fund positions. BorgWarner Inc. (NYSE:BWA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BWA is 42.4. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and surpassed the market again by 6.7 percentage points. Unfortunately BWA wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BWA investors were disappointed as the stock returned 3.4% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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