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Were Hedge Funds Right About Pulling The Plug On Barnes Group Inc. (B)?

Reymerlyn Martin

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 second quarter. You can find write-ups 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 and analyze what the smart money thinks of Barnes Group Inc. (NYSE:B) based on that data.

Barnes Group Inc. (NYSE:B) investors should pay attention to a decrease in hedge fund interest lately. B was in 15 hedge funds' portfolios at the end of June. There were 18 hedge funds in our database with B positions at the end of the previous quarter. Our calculations also showed that B isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? 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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

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. Let's view the recent hedge fund action encompassing Barnes Group Inc. (NYSE:B).

What does smart money think about Barnes Group Inc. (NYSE:B)?

At Q2's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards B over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

B_oct2019

Among these funds, Millennium Management held the most valuable stake in Barnes Group Inc. (NYSE:B), which was worth $13.1 million at the end of the second quarter. On the second spot was D E Shaw which amassed $12.9 million worth of shares. Moreover, Renaissance Technologies, GLG Partners, and Fisher Asset Management were also bullish on Barnes Group Inc. (NYSE:B), allocating a large percentage of their portfolios to this stock.

Because Barnes Group Inc. (NYSE:B) has faced falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds who were dropping their positions entirely last quarter. Interestingly, Benjamin A. Smith's Laurion Capital Management cut the largest investment of the "upper crust" of funds tracked by Insider Monkey, comprising close to $0.9 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also sold off its stock, about $0.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let's check out hedge fund activity in other stocks similar to Barnes Group Inc. (NYSE:B). These stocks are Hutchison China MediTech Limited (NASDAQ:HCM), Cathay General Bancorp (NASDAQ:CATY), Advanced Disposal Services, Inc. (NYSE:ADSW), and Steven Madden, Ltd. (NASDAQ:SHOO). This group of stocks' market values resemble B's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HCM,23,103651,17 CATY,12,38123,-2 ADSW,26,559342,14 SHOO,14,48056,-4 Average,18.75,187293,6.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $187 million. That figure was $57 million in B's case. Advanced Disposal Services, Inc. (NYSE:ADSW) is the most popular stock in this table. On the other hand Cathay General Bancorp (NASDAQ:CATY) is the least popular one with only 12 bullish hedge fund positions. Barnes Group Inc. (NYSE:B) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately B wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); B investors were disappointed as the stock returned -8.2% 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 in 2019.

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

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