Hedge Funds Have Never Been This Bullish On Brighthouse Financial, Inc. (BHF)

Debasis Saha

Sat, Mar 28, 2020, 7:34 PM 6 min read

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article we look at what those investors think of Brighthouse Financial, Inc. (NASDAQ:BHF).

Brighthouse Financial, Inc. (NASDAQ:BHF) was in 43 hedge funds' portfolios at the end of the fourth quarter of 2019. BHF has experienced an increase in hedge fund interest lately. There were 29 hedge funds in our database with BHF holdings at the end of the previous quarter. Our calculations also showed that BHF isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In today’s marketplace there are a large number of tools stock traders have at their disposal to assess stocks. Some of the most useful tools are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the top picks of the best hedge fund managers can outperform their index-focused peers by a superb margin (see the details here).

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now let's take a peek at the fresh hedge fund action encompassing Brighthouse Financial, Inc. (NASDAQ:BHF).

How have hedgies been trading Brighthouse Financial, Inc. (NASDAQ:BHF)?

Heading into the first quarter of 2020, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 48% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in BHF a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Brighthouse Financial, Inc. (NASDAQ:BHF) was held by Greenlight Capital, which reported holding $140.2 million worth of stock at the end of September. It was followed by Miller Value Partners with a $87.6 million position. Other investors bullish on the company included Arrowstreet Capital, AQR Capital Management, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Greenlight Capital allocated the biggest weight to Brighthouse Financial, Inc. (NASDAQ:BHF), around 10.4% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, setting aside 3.17 percent of its 13F equity portfolio to BHF.

Now, key money managers have been driving this bullishness. Voss Capital, managed by Travis Cocke, initiated the most valuable position in Brighthouse Financial, Inc. (NASDAQ:BHF). Voss Capital had $4.9 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe's Voleon Capital also made a $4.3 million investment in the stock during the quarter. The following funds were also among the new BHF investors: Noam Gottesman's GLG Partners, Michael Gelband's ExodusPoint Capital, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.

Let's now take a look at hedge fund activity in other stocks similar to Brighthouse Financial, Inc. (NASDAQ:BHF). We will take a look at Echostar Corporation (NASDAQ:SATS), CoreSite Realty Corp (NYSE:COR), NIO Inc. (NYSE:NIO), and Transocean Ltd (NYSE:RIG). All of these stocks' market caps match BHF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SATS,26,641376,-6 COR,21,254981,4 NIO,16,68386,3 RIG,26,615765,-13 Average,22.25,395127,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $395 million. That figure was $611 million in BHF's case. Echostar Corporation (NASDAQ:SATS) is the most popular stock in this table. On the other hand NIO Inc. (NYSE:NIO) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Brighthouse Financial, Inc. (NASDAQ:BHF) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately BHF wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BHF were disappointed as the stock returned -37.7% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.