Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don't publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That's why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze BrightSphere Investment Group Inc. (NYSE:BSIG) from the perspective of those elite funds.
BrightSphere Investment Group Inc. (NYSE:BSIG) shareholders have witnessed a decrease in hedge fund interest recently. BSIG was in 19 hedge funds' portfolios at the end of the second quarter of 2019. There were 21 hedge funds in our database with BSIG positions at the end of the previous quarter. Our calculations also showed that BSIG 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.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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 review the latest hedge fund action encompassing BrightSphere Investment Group Inc. (NYSE:BSIG).
Hedge fund activity in BrightSphere Investment Group Inc. (NYSE:BSIG)
Heading into the third quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position in BSIG a year ago. 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, Paulson & Co, managed by John Paulson, holds the number one position in BrightSphere Investment Group Inc. (NYSE:BSIG). Paulson & Co has a $228.2 million position in the stock, comprising 3.9% of its 13F portfolio. Sitting at the No. 2 spot is Nathaniel August of Mangrove Partners, with a $21 million position; the fund has 2.4% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism contain Ken Griffin's Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Steve Cohen's Point72 Asset Management.
Seeing as BrightSphere Investment Group Inc. (NYSE:BSIG) has experienced bearish sentiment from the smart money, we can see that there were a few hedgies who sold off their full holdings in the second quarter. Intriguingly, Paul Marshall and Ian Wace's Marshall Wace LLP dropped the biggest investment of the 750 funds watched by Insider Monkey, valued at close to $5.6 million in stock. Andrew Feldstein and Stephen Siderow's fund, Blue Mountain Capital, also dropped its stock, about $0.6 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds in the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to BrightSphere Investment Group Inc. (NYSE:BSIG). These stocks are Tactile Systems Technology, Inc. (NASDAQ:TCMD), Big Lots, Inc. (NYSE:BIG), Independence Realty Trust Inc (NYSE:IRT), and Encore Capital Group, Inc. (NASDAQ:ECPG). This group of stocks' market valuations resemble BSIG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TCMD,15,60665,-2 BIG,20,117046,0 IRT,8,65969,-3 ECPG,8,63507,-6 Average,12.75,76797,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $326 million in BSIG's case. Big Lots, Inc. (NYSE:BIG) is the most popular stock in this table. On the other hand Independence Realty Trust Inc (NYSE:IRT) is the least popular one with only 8 bullish hedge fund positions. BrightSphere Investment Group Inc. (NYSE:BSIG) is not the most popular stock in this group but hedge fund interest is still above average. 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 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. Unfortunately BSIG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BSIG were disappointed as the stock returned -12.3% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.