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Did Hedge Funds Drop The Ball On Blackbaud, Inc. (BLKB) ?

“Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.,” said Clearbridge Investments in its market commentary. We aren’t sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Blackbaud, Inc. (NASDAQ:BLKB) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Blackbaud, Inc. (NASDAQ:BLKB) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of December. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Tech Data Corp (NASDAQ:TECD), Proto Labs Inc (NYSE:PRLB), and Aaron’s, Inc. (NYSE:AAN) to gather more data points.

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 flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

Let’s take a peek at the recent hedge fund action encompassing Blackbaud, Inc. (NASDAQ:BLKB).

How have hedgies been trading Blackbaud, Inc. (NASDAQ:BLKB)?

Heading into the first quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BLKB over the last 14 quarters. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

No of Hedge Funds With BLKB Positions

The largest stake in Blackbaud, Inc. (NASDAQ:BLKB) was held by Select Equity Group, which reported holding $22.1 million worth of stock at the end of September. It was followed by Matrix Capital Management with a $12.6 million position. Other investors bullish on the company included Echo Street Capital Management, Gotham Asset Management, and Millennium Management.

Because Blackbaud, Inc. (NASDAQ:BLKB) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedgies that slashed their full holdings by the end of the third quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the largest investment of all the hedgies tracked by Insider Monkey, worth close to $10.1 million in stock, and John Kim’s Night Owl Capital Management was right behind this move, as the fund sold off about $8.1 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 now review hedge fund activity in other stocks similar to Blackbaud, Inc. (NASDAQ:BLKB). We will take a look at Tech Data Corp (NASDAQ:TECD), Proto Labs Inc (NYSE:PRLB), Aaron’s, Inc. (NYSE:AAN), and Centennial Resource Development, Inc. (NASDAQ:CDEV). All of these stocks’ market caps are closest to BLKB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TECD 23 191630 3
PRLB 10 20643 5
AAN 21 186605 3
CDEV 14 137178 -7
Average 17 134014 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $134 million. That figure was $58 million in BLKB’s case. Tech Data Corp (NASDAQ:TECD) is the most popular stock in this table. On the other hand Proto Labs Inc (NYSE:PRLB) is the least popular one with only 10 bullish hedge fund positions. Blackbaud, Inc. (NASDAQ:BLKB) 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 BLKB as the stock returned 25.8% and outperformed the market by an even larger margin.

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

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