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Is Black Hills Corp (BKH) Going to Burn Investors?

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Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Black Hills Corp (NYSE:BKH) investors should be aware of a decrease in activity from the world’s largest hedge funds of late. 13 hedge funds that we track were long the stock on September 30. There were 18 hedge funds in our database with BKH holdings at the end of the June quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Methanex Corporation (USA) (NASDAQ:MEOH), WGL Holdings Inc (NYSE:WGL), and Cimpress NV (NASDAQ:CMPR) to gather more data points.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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What does the smart money think about Black Hills Corp (NYSE:BKH)?

At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a 28% fall from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in BKH heading into this year, with hedge fund ownership of the stock having been stable until Q3, which is a worrisome signal. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

HedgeFundSentimentChart (119)

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Millennium Management, one of the 10 largest hedge funds in the world, holds the number one position in Black Hills Corp (NYSE:BKH). Millennium Management has an $82.3 million position in the stock. Sitting at the No. 2 spot is Adage Capital Management, led by Phill Gross and Robert Atchinson, which holds a $76.5 million position. Some other members of the smart money that are bullish comprise John M. Angelo and Michael L. Gordon’s Angelo Gordon & Co, Mario Gabelli’s GAMCO Investors, and Glenn Russell Dubin’s Highbridge Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

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