Badger Meter, Inc. (BMI): Hedge Funds In Wait-and-See Mode

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 articles 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 over the last 5 years and analyze what the smart money thinks of Badger Meter, Inc. (NYSE:BMI) based on that data and determine whether they were really smart about the stock.

Badger Meter, Inc. (NYSE:BMI) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds’ portfolios at the end of June. Our calculations also showed that BMI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). 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 Summit Materials Inc (NYSE:SUM), Micro Focus Intl PLC (NYSE:MFGP), and Beacon Roofing Supply, Inc. (NASDAQ:BECN) to gather more data points. Our calculations also showed that BMI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the 21st century investor’s toolkit there are dozens of gauges stock traders use to appraise stocks. Two of the most useful gauges are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the top picks of the best hedge fund managers can beat their index-focused peers by a superb margin (see the details here).

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox.Keeping this in mind let’s review the key hedge fund action encompassing Badger Meter, Inc. (NYSE:BMI).

How have hedgies been trading Badger Meter, Inc. (NYSE:BMI)?

At second quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in BMI a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Impax Asset Management, managed by Ian Simm, holds the largest position in Badger Meter, Inc. (NYSE:BMI). Impax Asset Management has a $99.4 million position in the stock, comprising 1% of its 13F portfolio. Coming in second is GAMCO Investors, led by Mario Gabelli, holding a $9.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Chuck Royce’s Royce & Associates and Renaissance Technologies. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Badger Meter, Inc. (NYSE:BMI), around 1.02% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.42 percent of its 13F equity portfolio to BMI.

Since Badger Meter, Inc. (NYSE:BMI) has experienced falling interest from the smart money, it’s safe to say that there is a sect of hedge funds that elected to cut their full holdings heading into Q3. Interestingly, Israel Englander’s Millennium Management said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, comprising about $2.8 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $1.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Badger Meter, Inc. (NYSE:BMI) but similarly valued. We will take a look at Summit Materials Inc (NYSE:SUM), Micro Focus Intl PLC (NYSE:MFGP), Beacon Roofing Supply, Inc. (NASDAQ:BECN), Sandstorm Gold Ltd. (NYSE:SAND), Hancock Whitney Corporation (NASDAQ:HWC), Monro Inc (NASDAQ:MNRO), and Aurinia Pharmaceuticals Inc (NASDAQ:AUPH). This group of stocks’ market values are similar to BMI’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $139 million in BMI’s case. Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is the most popular stock in this table. On the other hand Monro Inc (NASDAQ:MNRO) is the least popular one with only 11 bullish hedge fund positions. Badger Meter, Inc. (NYSE:BMI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BMI is 35. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately BMI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BMI were disappointed as the stock returned 4.2% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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