Hedge Funds Have Never Been This Bullish On Brooks Automation, Inc. (BRKS)

Abigail Fisher

Sat, Mar 28, 2020, 6:53 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. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Brooks Automation, Inc. (NASDAQ:BRKS) in this article.

Brooks Automation, Inc. (NASDAQ:BRKS) has experienced an increase in activity from the world's largest hedge funds lately. BRKS was in 28 hedge funds' portfolios at the end of December. There were 14 hedge funds in our database with BRKS positions at the end of the previous quarter. Our calculations also showed that BRKS 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 the 21st century investor’s toolkit there are a multitude of methods stock market investors employ to analyze publicly traded companies. Some of the most underrated methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite fund managers can beat the S&P 500 by a superb margin (see the details here).

[caption id="attachment_26092" align="aligncenter" width="399"]

Joel Greenblatt of Gotham Asset Management[/caption]

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 gander at the recent hedge fund action encompassing Brooks Automation, Inc. (NASDAQ:BRKS).

What have hedge funds been doing with Brooks Automation, Inc. (NASDAQ:BRKS)?

At Q4's end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in BRKS over the last 18 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.

The largest stake in Brooks Automation, Inc. (NASDAQ:BRKS) was held by Fisher Asset Management, which reported holding $49.7 million worth of stock at the end of September. It was followed by Tower House Partners with a $44.1 million position. Other investors bullish on the company included Royce & Associates, Marshall Wace LLP, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Tower House Partners allocated the biggest weight to Brooks Automation, Inc. (NASDAQ:BRKS), around 31.37% of its 13F portfolio. Voce Capital is also relatively very bullish on the stock, dishing out 1.22 percent of its 13F equity portfolio to BRKS.

As aggregate interest increased, key hedge funds have jumped into Brooks Automation, Inc. (NASDAQ:BRKS) headfirst. GLG Partners, managed by Noam Gottesman, assembled the biggest position in Brooks Automation, Inc. (NASDAQ:BRKS). GLG Partners had $7.3 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also made a $4.7 million investment in the stock during the quarter. The following funds were also among the new BRKS investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Joel Greenblatt's Gotham Asset Management, and Michael Kharitonov and Jon David McAuliffe's Voleon Capital.

Let's now review hedge fund activity in other stocks similar to Brooks Automation, Inc. (NASDAQ:BRKS). These stocks are Cogent Communications Holdings, Inc. (NASDAQ:CCOI), Vishay Intertechnology, Inc. (NYSE:VSH), Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), and Atlas Corp. (NYSE:SSW). All of these stocks' market caps are similar to BRKS's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCOI,24,405167,-6 VSH,20,363288,-3 SBGI,33,406464,4 SSW,15,1150151,3 Average,23,581268,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $581 million. That figure was $206 million in BRKS's case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Atlas Corp. (NYSE:SSW) is the least popular one with only 15 bullish hedge fund positions. Brooks Automation, Inc. (NASDAQ:BRKS) 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 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 but beat the market by 5.5 percentage points. Unfortunately BRKS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BRKS were disappointed as the stock returned -32.3% during the same time period 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.