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Was The Smart Money Right About The Bank of New York Mellon (BK)?

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards The Bank of New York Mellon Corporation (NYSE:BK).

Is The Bank of New York Mellon Corporation (NYSE:BK) a buy, sell, or hold? Investors who are in the know were becoming less hopeful. The number of bullish hedge fund positions dropped by 1 lately. The Bank of New York Mellon Corporation (NYSE:BK) was in 47 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 58. Our calculations also showed that BK isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 48 hedge funds in our database with BK holdings at the end of September.

In the eyes of most investors, hedge funds are perceived as underperforming, old investment vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, We hone in on the moguls of this club, approximately 850 funds. It is estimated that this group of investors handle bulk of the smart money's total capital, and by tracking their first-class picks, Insider Monkey has formulated a number of investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 197% since March 2017 (through March 2021) and beat the S&P 500 Index by 124 percentage points. You can download a sample issue of this newsletter on our website .

Donald Yacktman of Yacktman Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell 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. With all of this in mind we're going to go over the fresh hedge fund action surrounding The Bank of New York Mellon Corporation (NYSE:BK).

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

At the end of the fourth quarter, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BK over the last 22 quarters. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, Berkshire Hathaway was the largest shareholder of The Bank of New York Mellon Corporation (NYSE:BK), with a stake worth $3070.8 million reported as of the end of December. Trailing Berkshire Hathaway was D E Shaw, which amassed a stake valued at $194 million. Millennium Management, Yacktman Asset Management, and GLG Partners 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 Prana Capital Management allocated the biggest weight to The Bank of New York Mellon Corporation (NYSE:BK), around 11.31% of its 13F portfolio. LFL Advisers is also relatively very bullish on the stock, dishing out 7.95 percent of its 13F equity portfolio to BK.

Due to the fact that The Bank of New York Mellon Corporation (NYSE:BK) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of funds that elected to cut their full holdings by the end of the fourth quarter. Interestingly, John Petry's Sessa Capital dumped the largest position of the "upper crust" of funds followed by Insider Monkey, totaling about $24.9 million in stock. Jonathan Barrett and Paul Segal's fund, Luminus Management, also sold off its stock, about $8.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the fourth quarter.

Let's now take a look at hedge fund activity in other stocks similar to The Bank of New York Mellon Corporation (NYSE:BK). We will take a look at Microchip Technology Incorporated (NASDAQ:MCHP), Cintas Corporation (NASDAQ:CTAS), Chewy, Inc. (NYSE:CHWY), MSCI Inc (NYSE:MSCI), Brown-Forman Corporation (NYSE:BF), ING Groep N.V. (NYSE:ING), and Sempra Energy (NYSE:SRE). This group of stocks' market valuations resemble BK's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MCHP,45,961474,10 CTAS,36,746276,-2 CHWY,38,728528,-8 MSCI,41,984592,-6 BF,29,1575074,-3 ING,9,397074,0 SRE,33,778325,1 Average,33,881620,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $882 million. That figure was $4690 million in BK's case. Microchip Technology Incorporated (NASDAQ:MCHP) is the most popular stock in this table. On the other hand ING Groep N.V. (NYSE:ING) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks The Bank of New York Mellon Corporation (NYSE:BK) is more popular among hedge funds. Our overall hedge fund sentiment score for BK is 78.3. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on BK as the stock returned 19.2% since the end of December (through 4/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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