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Here is What Hedge Funds Think About Brookfield Business Partners L.P. (BBU)

Debasis Saha

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Brookfield Business Partners L.P. (NYSE:BBU).

Brookfield Business Partners L.P. (NYSE:BBU) investors should pay attention to an increase in support from the world's most elite money managers in recent months. Our calculations also showed that BBU isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26073" align="alignnone" width="600"] Jim Simons of Renaissance Technologies[/caption]

RENAISSANCE TECHNOLOGIES
RENAISSANCE TECHNOLOGIES

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now we're going to review the recent hedge fund action encompassing Brookfield Business Partners L.P. (NYSE:BBU).

How have hedgies been trading Brookfield Business Partners L.P. (NYSE:BBU)?

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BBU over the last 17 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BBU A Good Stock To Buy?
Is BBU A Good Stock To Buy?

The largest stake in Brookfield Business Partners L.P. (NYSE:BBU) was held by Renaissance Technologies, which reported holding $5.3 million worth of stock at the end of September. It was followed by Vertex One Asset Management with a $3.2 million position. Other investors bullish on the company included Citadel Investment Group, Marshall Wace, and Signition LP. In terms of the portfolio weights assigned to each position Signition LP allocated the biggest weight to Brookfield Business Partners L.P. (NYSE:BBU), around 1.17% of its 13F portfolio. Vertex One Asset Management is also relatively very bullish on the stock, dishing out 0.84 percent of its 13F equity portfolio to BBU.

Consequently, some big names were breaking ground themselves. Marshall Wace, managed by Paul Marshall and Ian Wace, created the biggest position in Brookfield Business Partners L.P. (NYSE:BBU). Marshall Wace had $0.7 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer's PEAK6 Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Brookfield Business Partners L.P. (NYSE:BBU) but similarly valued. We will take a look at Community Bank System, Inc. (NYSE:CBU), Watts Water Technologies Inc (NYSE:WTS), II-VI, Inc. (NASDAQ:IIVI), and Embraer SA (NYSE:ERJ). All of these stocks' market caps are closest to BBU's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CBU,13,23777,1 WTS,22,266224,7 IIVI,31,200487,10 ERJ,13,76731,6 Average,19.75,141805,6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $10 million in BBU's case. II-VI, Inc. (NASDAQ:IIVI) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Brookfield Business Partners L.P. (NYSE:BBU) is even less popular than CBU. Hedge funds dodged a bullet by taking a bearish stance towards BBU. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BBU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BBU investors were disappointed as the stock returned 5.7% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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