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Was The Smart Money Right About Loading Up On Brighthouse Financial, Inc. (BHF)?

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·6 min read
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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Brighthouse Financial, Inc. (NASDAQ:BHF).

Brighthouse Financial, Inc. (NASDAQ:BHF) was in 34 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 43. BHF shareholders have witnessed an increase in enthusiasm from smart money lately. There were 25 hedge funds in our database with BHF positions at the end of the first quarter. Our calculations also showed that BHF isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most shareholders, hedge funds are viewed as worthless, old investment tools of the past. While there are greater than 8000 funds trading at present, Our experts choose to focus on the elite of this club, around 850 funds. These money managers orchestrate bulk of the smart money's total capital, and by paying attention to their best stock picks, Insider Monkey has identified many investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Bill Miller
Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we're going to take a peek at the recent hedge fund action encompassing Brighthouse Financial, Inc. (NASDAQ:BHF).

Hedge fund activity in Brighthouse Financial, Inc. (NASDAQ:BHF)

At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BHF over the last 20 quarters. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, Greenlight Capital held the most valuable stake in Brighthouse Financial, Inc. (NASDAQ:BHF), which was worth $101.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $49.5 million worth of shares. Diamond Hill Capital, Miller Value Partners, and AQR Capital Management 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 Greenlight Capital allocated the biggest weight to Brighthouse Financial, Inc. (NASDAQ:BHF), around 10.98% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, designating 3.33 percent of its 13F equity portfolio to BHF.

As one would reasonably expect, key money managers were leading the bulls' herd. GLG Partners, managed by Noam Gottesman, initiated the most outsized position in Brighthouse Financial, Inc. (NASDAQ:BHF). GLG Partners had $5.7 million invested in the company at the end of the quarter. Paul Tudor Jones's Tudor Investment Corp also initiated a $3.1 million position during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital, Donald Sussman's Paloma Partners, and Greg Eisner's Engineers Gate Manager.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Brighthouse Financial, Inc. (NASDAQ:BHF) but similarly valued. We will take a look at Diodes Incorporated (NASDAQ:DIOD), Manchester United PLC (NYSE:MANU), Green Dot Corporation (NYSE:GDOT), Advanced Energy Industries, Inc. (NASDAQ:AEIS), Acushnet Holdings Corp. (NYSE:GOLF), Webster Financial Corporation (NYSE:WBS), and Pluralsight, Inc. (NASDAQ:PS). All of these stocks' market caps are similar to BHF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DIOD,14,78957,1 MANU,11,35251,3 GDOT,23,700625,1 AEIS,21,81139,7 GOLF,11,31850,-1 WBS,30,245581,-3 PS,27,233743,9 Average,19.6,201021,2.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $333 million in BHF's case. Webster Financial Corporation (NYSE:WBS) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Brighthouse Financial, Inc. (NASDAQ:BHF) is more popular among hedge funds. Our overall hedge fund sentiment score for BHF is 83.7. 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 23% in 2020 through October 30th but still managed to beat the market by 20.1 percentage points. Hedge funds were also right about betting on BHF as the stock returned 19% since the end of June (through 10/30) 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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