World-class money managers like Ken Griffin and Barry Rosenstein only invest their wealthy clients' money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It's not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It's also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.
Is Brookdale Senior Living, Inc. (NYSE:BKD) a worthy investment today? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund positions rose by 1 lately. Our calculations also showed that BKD isn't among the 30 most popular stocks among hedge funds. BKD was in 27 hedge funds' portfolios at the end of the first quarter of 2019. There were 26 hedge funds in our database with BKD 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 review the key hedge fund action encompassing Brookdale Senior Living, Inc. (NYSE:BKD).
What does the smart money think about Brookdale Senior Living, Inc. (NYSE:BKD)?
At Q1's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in BKD over the last 15 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Brookdale Senior Living, Inc. (NYSE:BKD) was held by Glenview Capital, which reported holding $95.6 million worth of stock at the end of March. It was followed by Camber Capital Management with a $72.4 million position. Other investors bullish on the company included Renaissance Technologies, Deerfield Management, and Land & Buildings Investment Management.
Consequently, some big names have been driving this bullishness. Berylson Capital Partners, managed by James Thomas Berylson, assembled the largest position in Brookdale Senior Living, Inc. (NYSE:BKD). Berylson Capital Partners had $2.5 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $2 million position during the quarter. The other funds with new positions in the stock are Benjamin A. Smith's Laurion Capital Management, Hoon Kim's Quantinno Capital, and John Overdeck and David Siegel's Two Sigma Advisors.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Brookdale Senior Living, Inc. (NYSE:BKD) but similarly valued. We will take a look at Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), Presidio, Inc. (NASDAQ:PSDO), Monmouth R.E. Inv. Corp. (NYSE:MNR), and Hercules Capital, Inc. (NYSE:HTGC). This group of stocks' market caps match BKD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRHC,7,22718,-5 PSDO,25,57575,19 MNR,9,57010,0 HTGC,10,9623,-1 Average,12.75,36732,3.25 [/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 $37 million. That figure was $363 million in BKD's case. Presidio, Inc. (NASDAQ:PSDO) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Brookdale Senior Living, Inc. (NYSE:BKD) is more popular among hedge funds. 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. Unfortunately BKD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BKD were disappointed as the stock returned -6.1% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.