Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
One stock that has seen an increase in popularity among smart money investors is Blackhawk Network Holdings Inc (NASDAQ:HAWK), in which 31 funds from our database held shares at the end of September. At the end of this article we will also compare HAWK to other stocks including Invesco Mortgage Capital Inc (NYSE:IVR), Argo Group International Holdings, Ltd. (NASDAQ:AGII), and AZZ Incorporated (NYSE:AZZ) to get a better sense of its popularity.
We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
Now, let’s take a look at the latest action encompassing Blackhawk Network Holdings Inc (NASDAQ:HAWK).
Hedge fund activity in Blackhawk Network Holdings Inc (NASDAQ:HAWK)
At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in Blackhawk Network Holdings, up by 41% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in HAWK at the beginning of this year. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Claus Moller’s P2 Capital Partners has the number one position in Blackhawk Network Holdings Inc (NASDAQ:HAWK), worth close to $84.7 million, amounting to 13.3% of its total 13F portfolio. Sitting at the No. 2 spot is Peter S. Park’s Park West Asset Management, with a $67.9 million position; the fund has 6.2% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish contain Alok Agrawal’s Bloom Tree Partners, James A. Noonan’s Pivot Point Capital, and Douglas Dossey and Arthur Young’s Tensile Capital. We should note that Tensile Capital is 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.