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 BWX Technologies Inc (NYSE:BWXT) from the perspective of those elite funds.
Is BWX Technologies Inc (NYSE:BWXT) a great investment now? The smart money is taking a pessimistic view. The number of bullish hedge fund bets were trimmed by 1 recently. Our calculations also showed that bwxt isn't among the 30 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 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 check out the latest hedge fund action encompassing BWX Technologies Inc (NYSE:BWXT).
How have hedgies been trading BWX Technologies Inc (NYSE:BWXT)?
Heading into the second quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BWXT over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Alkeon Capital Management was the largest shareholder of BWX Technologies Inc (NYSE:BWXT), with a stake worth $50.6 million reported as of the end of March. Trailing Alkeon Capital Management was Citadel Investment Group, which amassed a stake valued at $9.9 million. Two Sigma Advisors, MSDC Management, and Ancora Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Since BWX Technologies Inc (NYSE:BWXT) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of money managers who sold off their positions entirely in the third quarter. Intriguingly, John A. Levin's Levin Capital Strategies cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, worth an estimated $0.6 million in stock. Minhua Zhang's fund, Weld Capital Management, also dumped its stock, about $0.6 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds in the third quarter.
Let's also examine hedge fund activity in other stocks similar to BWX Technologies Inc (NYSE:BWXT). We will take a look at Avnet, Inc. (NASDAQ:AVT), Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC), LivaNova PLC (NASDAQ:LIVN), and MGIC Investment Corporation (NYSE:MTG). This group of stocks' market valuations resemble BWXT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVT,17,586463,-7 TKC,7,8792,-2 LIVN,20,262833,-2 MTG,32,392959,-3 Average,19,312762,-3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $108 million in BWXT's case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 7 bullish hedge fund positions. BWX Technologies Inc (NYSE:BWXT) is not the least popular stock in this group but hedge fund interest is still below average. 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 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 BWXT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BWXT investors were disappointed as the stock returned -5.1% 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.