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Were Hedge Funds Right About Belden Inc. (BDC)?

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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Belden Inc. (NYSE:BDC) based on that data.

Is Belden Inc. (NYSE:BDC) going to take off soon? Money managers were in a bullish mood. The number of bullish hedge fund positions improved by 1 in recent months. Belden Inc. (NYSE:BDC) was in 17 hedge funds' portfolios at the end of March. The all time high for this statistic is 22. Our calculations also showed that BDC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 16 hedge funds in our database with BDC holdings at the end of December.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management
Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind we're going to take a look at the recent hedge fund action regarding Belden Inc. (NYSE:BDC).

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

At Q1's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in BDC a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Pzena Investment Management was the largest shareholder of Belden Inc. (NYSE:BDC), with a stake worth $99.7 million reported as of the end of March. Trailing Pzena Investment Management was D E Shaw, which amassed a stake valued at $20.6 million. Arrowstreet Capital, Renaissance Technologies, and Citadel Investment Group 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 Pzena Investment Management allocated the biggest weight to Belden Inc. (NYSE:BDC), around 0.41% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.04 percent of its 13F equity portfolio to BDC.

As aggregate interest increased, key money managers were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, assembled the most valuable position in Belden Inc. (NYSE:BDC). ExodusPoint Capital had $0.6 million invested in the company at the end of the quarter. Peter Muller's PDT Partners also initiated a $0.5 million position during the quarter. The other funds with brand new BDC positions are Greg Eisner's Engineers Gate Manager, Ken Griffin's Citadel Investment Group, and Karim Abbadi and Edward McBride's Centiva Capital.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Belden Inc. (NYSE:BDC) but similarly valued. These stocks are Carpenter Technology Corporation (NYSE:CRS), Super Micro Computer, Inc. (NASDAQ:SMCI), Madison Square Garden Entertainment Corp. (NYSE:MSGE), Burford Capital Limited (NYSE:BUR), La-Z-Boy Incorporated (NYSE:LZB), Columbia Property Trust Inc (NYSE:CXP), and Goldman Sachs BDC, Inc. (NYSE:GSBD). All of these stocks' market caps are closest to BDC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRS,14,64400,0 SMCI,21,447309,1 MSGE,23,324971,-4 BUR,6,30046,-1 LZB,24,110904,11 CXP,12,62630,-1 GSBD,5,5208,3 Average,15,149353,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $163 million in BDC's case. La-Z-Boy Incorporated (NYSE:LZB) is the most popular stock in this table. On the other hand Goldman Sachs BDC, Inc. (NYSE:GSBD) is the least popular one with only 5 bullish hedge fund positions. Belden Inc. (NYSE:BDC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BDC is 60.8. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately BDC wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BDC were disappointed as the stock returned 7.8% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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