The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 28. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Sotheby's (NYSE:BID).
Sotheby's (NYSE:BID) investors should be aware of an increase in hedge fund sentiment lately. BID was in 20 hedge funds' portfolios at the end of the second quarter of 2019. There were 18 hedge funds in our database with BID positions at the end of the previous quarter. Our calculations also showed that BID isn't among the 30 most popular stocks among hedge funds (view video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to analyze the key hedge fund action regarding Sotheby's (NYSE:BID).
What have hedge funds been doing with Sotheby's (NYSE:BID)?
Heading into the third quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BID over the last 16 quarters. With hedge funds' sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
More specifically, Third Point was the largest shareholder of Sotheby's (NYSE:BID), with a stake worth $387.2 million reported as of the end of March. Trailing Third Point was Paulson & Co, which amassed a stake valued at $195.8 million. Alpine Associates, Springbok Capital, and Water Island Capital were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Paulson & Co, managed by John Paulson, established the biggest position in Sotheby's (NYSE:BID). Paulson & Co had $195.8 million invested in the company at the end of the quarter. Robert Emil Zoellner's Alpine Associates also initiated a $28.8 million position during the quarter. The other funds with new positions in the stock are Gavin Saitowitz and Cisco J. del Valle's Springbok Capital, John Orrico's Water Island Capital, and Ricky Sandler's Eminence Capital.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Sotheby's (NYSE:BID) but similarly valued. These stocks are Iridium Communications Inc. (NASDAQ:IRDM), Albany International Corp. (NYSE:AIN), Noah Holdings Limited (NYSE:NOAH), and Resideo Technologies, Inc. (NYSE:REZI). This group of stocks' market valuations resemble BID's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IRDM,12,114056,0 AIN,15,82406,-1 NOAH,12,218313,-2 REZI,29,432922,-3 Average,17,211924,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $212 million. That figure was $739 million in BID's case. Resideo Technologies, Inc. (NYSE:REZI) is the most popular stock in this table. On the other hand Iridium Communications Inc. (NASDAQ:IRDM) is the least popular one with only 12 bullish hedge fund positions. Sotheby's (NYSE:BID) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BID wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BID were disappointed as the stock returned -2% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.