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Bandwidth Inc. (BAND): Hedge Funds Taking Some Chips Off The Table

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Bandwidth Inc. (NASDAQ:BAND) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Bandwidth Inc. (NASDAQ:BAND) has experienced a decrease in enthusiasm from smart money of late. Bandwidth Inc. (NASDAQ:BAND) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistics is 33. Our calculations also showed that BAND 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In the eyes of most stock holders, hedge funds are viewed as underperforming, outdated investment vehicles of the past. While there are greater than 8000 funds in operation at present, Our researchers look at the elite of this club, approximately 850 funds. These hedge fund managers command most of all hedge funds’ total asset base, and by following their inimitable picks, Insider Monkey has found a number of investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Driehaus of Driehaus Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Now we’re going to take a glance at the key hedge fund action regarding Bandwidth Inc. (NASDAQ:BAND).

How are hedge funds trading Bandwidth Inc. (NASDAQ:BAND)?

At Q2’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BAND over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Bandwidth Inc. (NASDAQ:BAND) was held by Alta Park Capital, which reported holding $49.6 million worth of stock at the end of September. It was followed by Royce & Associates with a $30.4 million position. Other investors bullish on the company included Portolan Capital Management, Point72 Asset Management, and Driehaus Capital. In terms of the portfolio weights assigned to each position Alta Park Capital allocated the biggest weight to Bandwidth Inc. (NASDAQ:BAND), around 7.26% of its 13F portfolio. Shelter Haven Capital Management is also relatively very bullish on the stock, setting aside 5.39 percent of its 13F equity portfolio to BAND.

Because Bandwidth Inc. (NASDAQ:BAND) has experienced falling interest from hedge fund managers, we can see that there exists a select few hedgies that elected to cut their full holdings heading into Q3. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP cut the biggest investment of the 750 funds monitored by Insider Monkey, worth close to $5.6 million in stock. fund, Highbridge Capital Management, also dropped its stock, about $2.5 million worth. These moves are important to note, as total hedge fund interest was cut by 3 funds heading into Q3.

Let’s go over hedge fund activity in other stocks similar to Bandwidth Inc. (NASDAQ:BAND). We will take a look at Inovalon Holdings Inc (NASDAQ:INOV), Lazard Ltd (NYSE:LAZ), Proto Labs Inc (NYSE:PRLB), Granite Real Estate Investment Trust (NYSE:GRP), Companhia Energética de Minas Gerais (NYSE:CIG), Gates Industrial Corporation plc (NYSE:GTES), and Tenable Holdings, Inc. (NASDAQ:TENB). All of these stocks’ market caps resemble BAND’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
INOV 13 77487 -2
LAZ 18 522215 3
PRLB 17 25450 4
GRP 6 17893 2
CIG 9 27400 -1
GTES 10 37036 2
TENB 22 251809 -2
Average 13.6 137041 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $294 million in BAND’s case. Tenable Holdings, Inc. (NASDAQ:TENB) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Bandwidth Inc. (NASDAQ:BAND) is more popular among hedge funds. Our overall hedge fund sentiment score for BAND is 79.3. 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. 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 returned 23.8% in 2020 through September 14th but still managed to beat the market by 17.6 percentage points. Hedge funds were also right about betting on BAND as the stock returned 15% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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