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Did Hedge Funds Drop The Ball On Benchmark Electronics, Inc. (BHE) ?

Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Benchmark Electronics, Inc. (NYSE:BHE).

Benchmark Electronics, Inc. (NYSE:BHE) investors should pay attention to a decrease in hedge fund interest of late. BHE was in 12 hedge funds’ portfolios at the end of December. There were 13 hedge funds in our database with BHE holdings at the end of the previous quarter. Our calculations also showed that BHE isn’t among the 30 most popular stocks among hedge funds.

In the 21st century investor’s toolkit there are numerous formulas investors have at their disposal to assess their holdings. A pair of the less known formulas are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the best money managers can beat their index-focused peers by a significant margin (see the details here).

Glenn Welling Engaged Capital

We’re going to review the recent hedge fund action regarding Benchmark Electronics, Inc. (NYSE:BHE).

Hedge fund activity in Benchmark Electronics, Inc. (NYSE:BHE)

At Q4’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in BHE a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

BHE_may2019

More specifically, Engaged Capital was the largest shareholder of Benchmark Electronics, Inc. (NYSE:BHE), with a stake worth $47.4 million reported as of the end of December. Trailing Engaged Capital was Royce & Associates, which amassed a stake valued at $18.5 million. Renaissance Technologies, D E Shaw, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Because Benchmark Electronics, Inc. (NYSE:BHE) has faced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few hedge funds who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Alec Litowitz and Ross Laser’s Magnetar Capital dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, worth an estimated $0.3 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also said goodbye to its stock, about $0.1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Benchmark Electronics, Inc. (NYSE:BHE) but similarly valued. These stocks are Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), InfraREIT Inc (NYSE:HIFR), PGT Innovations Inc. (NYSE:PGTI), and Amphastar Pharmaceuticals Inc (NASDAQ:AMPH). This group of stocks’ market valuations are similar to BHE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RYTM 10 189107 -5
HIFR 15 197476 1
PGTI 20 112859 -2
AMPH 8 11805 3
Average 13.25 127812 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $105 million in BHE’s case. PGT Innovations Inc. (NYSE:PGTI) is the most popular stock in this table. On the other hand Amphastar Pharmaceuticals Inc (NASDAQ:AMPH) is the least popular one with only 8 bullish hedge fund positions. Benchmark Electronics, Inc. (NYSE:BHE) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on BHE as the stock returned 38.8% and outperformed the market by an even larger margin.

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

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