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BlackLine, Inc. (BL): Hedge Funds In Wait-and-See Mode

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. After several tireless days we have finished crunching the numbers from nearly 835 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of December 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards BlackLine, Inc. (NASDAQ:BL).

Hedge fund interest in BlackLine, Inc. (NASDAQ:BL) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare BL to other stocks including Crocs, Inc. (NASDAQ:CROX), Retail Properties of America Inc (NYSE:RPAI), and Texas Capital Bancshares Inc (NASDAQ:TCBI) to get a better sense of its popularity.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Philip Hempleman Ardsley Partners

Philip Hempleman of Ardsley Partners

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s review the key hedge fund action surrounding BlackLine, Inc. (NASDAQ:BL).

Hedge fund activity in BlackLine, Inc. (NASDAQ:BL)

Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BL over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, D E Shaw held the most valuable stake in BlackLine, Inc. (NASDAQ:BL), which was worth $84.1 million at the end of the third quarter. On the second spot was Toronado Partners which amassed $35 million worth of shares. Millennium Management, Two Sigma Advisors, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Toronado Partners allocated the biggest weight to BlackLine, Inc. (NASDAQ:BL), around 9.94% of its 13F portfolio. Tenzing Global Investors is also relatively very bullish on the stock, designating 0.23 percent of its 13F equity portfolio to BL.

Because BlackLine, Inc. (NASDAQ:BL) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers who sold off their full holdings by the end of the third quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest investment of the 750 funds watched by Insider Monkey, valued at close to $5.8 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dropped about $1.9 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as BlackLine, Inc. (NASDAQ:BL) but similarly valued. These stocks are Crocs, Inc. (NASDAQ:CROX), Retail Properties of America Inc (NYSE:RPAI), Texas Capital Bancshares Inc (NASDAQ:TCBI), and Fulton Financial Corp (NASDAQ:FULT). This group of stocks’ market valuations are closest to BL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CROX 36 691240 6
RPAI 21 266145 -4
TCBI 26 251196 4
FULT 14 28333 -3
Average 24.25 309229 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $309 million. That figure was $185 million in BL’s case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand Fulton Financial Corp (NASDAQ:FULT) is the least popular one with only 14 bullish hedge fund positions. BlackLine, Inc. (NASDAQ:BL) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on BL as the stock returned -8.5% during the same time period and outperformed the market by an even larger margin.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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