Were hedge funds right about BHP Group (BHP)?

In this article, you’ll find out if hedge funds think BHP Group (NYSE: BHP) is a good investment right now. We like to check out what smart money thinks before we do any extensive research on any given stock. While there have been several failed top hedge fund picks, consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. This is not surprising given that hedge funds have access to better information and more resources to predict winners in the stock market.

East BHP Group (NYSE: BHP) a top investment now? Informed investors reduced their bets on the title. The number of long bets on hedge funds has fallen by 2 in recent months. BHP Group (NYSE: BHP) was listed in 18 hedge fund portfolios at the end of March. The historical high for this statistic is 24. Our calculations also showed that BHP is not in the top 30 most popular stocks among hedge funds (click for Q1 rank). There were 20 hedge funds in our database with BHP positions at the end of the fourth quarter.

The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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At Insider Monkey, we scour multiple sources to uncover the next big investing idea. For example, the pet market is growing at an annual rate of 7% and is expected to reach $ 110 billion in 2021. So we look at the 5 best stocks for animal lovers. We scour lists like the 15 Best Jim Cramer Stocks to identify the next Tesla that will deliver outsized returns. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to market arguments at hedge fund conferences. You can sign up for our free daily newsletter on our homepage. With all of that in mind, let’s check out the latest hedge fund action encompassing the BHP Group (NYSE: BHP).

Do hedge funds think BHP is a good stock to buy now?

At the end of March, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. On the other hand, there were a total of 18 hedge funds with a bullish position on BHP a year ago. So let’s see which hedge funds were among the top stock holders and which hedge funds were making big moves.

Specifically, Fisher Asset Management was the largest shareholder in the BHP Group (NYSE: BHP), with a stake worth $ 553.8 million reported in late March. Lagging behind Fisher Asset Management was Arrowstreet Capital, which raised a stake valued at $ 114.3 million. Renaissance Technologies, CQS Cayman LP, and Citadel Investment Group were also very fond of the stock, becoming one of the firm’s largest hedge fund holders. In terms of the portfolio weights assigned to each position, CQS Cayman LP assigned the largest weight to the BHP Group (NYSE: BHP), approximately 2.79% of its 13F portfolio. Hourglass Capital is also relatively very bullish on the stock, allocating 1.58% of its 13F equity portfolio to BHP.

Given that the BHP Group (NYSE: BHP) has witnessed a drop in sentiment among hedge fund managers, logic dictates that there is a specific group of fund managers who are completely abandoning their positions before the second quarter. . Oddly enough, Simon Sadler’s Segantii Capital dropped the largest position of all hedges monitored by Insider Monkey, valued at nearly $ 49.4 million in shares, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners were just behind that. move, as the fund dropped about $ 24.7 million. These movements are important to note, as overall hedge fund interest fell by 2 funds before the second quarter.

Let’s also look at the activity of hedge funds in other stocks similar to BHP Group (NYSE: BHP). These stocks are McDonald’s Corporation (NYSE: MCD), Pinduoduo Inc. (NASDAQ: PDD), Wells Fargo & Company (NYSE: WFC), Danaher Corporation (NYSE: DHR), Medtronic plc (NYSE: MDT), Novo Nordisk A / S (NYSE: NVO) and Costco Wholesale Corporation (NASDAQ: COST). The market value of this group of shares is closest to the market value of BHP.

[table] Ticker, number of HF with positions, total value of HF positions (x1000), change of HF MCD position, 67.3783829.5 PDD, 56.6293871.2 WFC, 96.744581, -3 DHR, 81.5796963.0 MDT, 65.3627546.6 NVO, 23.2929727.0 COT, 56.4014769, -5 Medium, 63.4.4843041,0,7 [/table]

Check the table here if you have formatting issues.

As you can see, these stocks had an average of 63.4 hedge funds with bullish positions and the average amount invested in these stocks was $ 4,843 million. That figure was $ 874 million in the case of BHP. Wells Fargo & Company (NYSE: WFC) is the most popular stock in this table. On the other hand, Novo Nordisk A / S (NYSE: NVO) is the least popular with only 23 bullish hedge fund positions. Compared to these stocks, BHP Group (NYSE: BHP) is even less popular than NVO. Our overall hedge fund sentiment score for BHP is 25.5. Stocks with a higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds dodged a bullet by taking a bearish stance towards BHP. Our calculations showed that the 10 most popular hedge fund stocks 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 23, but managed to beat the market again by 10.1 percentage points. Unfortunately, BHP was not as popular as these 5 stocks (hedge fund sentiment was very bearish); BHP investors were disappointed as the stock has returned 10.1% since the end of the first quarter (through 7/23) and has underperformed the market. If you want to invest in large cap stocks with huge upside potential, you should check out the 5 most popular stocks among hedge funds, as most of these stocks have already outperformed the market since 2019.

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Disclosure: none. This article originally appeared on Insider Monkey.

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