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Benefitfocus Inc (BNFT): Are Hedge Funds Right About This Stock?

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The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Benefitfocus Inc (NASDAQ:BNFT) from the perspective of those successful funds.

Benefitfocus Inc (NASDAQ:BNFT) shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 7 hedge funds in our database with BNFT holdings at the end of the previous quarter. At the end of this article we will also compare BNFT to other stocks including Medpace Holdings Inc (NASDAQ:MEDP), Nextera Energy Partners LP (NYSE:NEP), and Schweitzer-Mauduit International, Inc. (NYSE:SWM) to get a better sense of its popularity.

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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Now, let’s take a glance at the recent action encompassing Benefitfocus Inc (NASDAQ:BNFT).

How have hedgies been trading Benefitfocus Inc (NASDAQ:BNFT)?

Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in BNFT over the last 5 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

HedgeFundSentimentChart

Of the funds tracked by Insider Monkey, Thomas E. Claugus’s GMT Capital has the most valuable position in Benefitfocus Inc (NASDAQ:BNFT), worth close to $5.8 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $3.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions encompass Jim Simons’s Renaissance Technologies, Phil Frohlich’s Prescott Group Capital Management and Ken Griffin’s Citadel Investment Group. 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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