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Did Hedge Funds Make The Right Call On Blackbaud, Inc. (BLKB) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtBlackbaud, Inc. (NASDAQ:BLKB) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Blackbaud, Inc. (NASDAQ:BLKB) was in 22 hedge funds’ portfolios at the end of March. BLKB investors should be aware of an increase in activity from the world’s largest hedge funds recently. There were 16 hedge funds in our database with BLKB holdings at the end of the previous quarter. Our calculations also showed that BLKB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind we’re going to view the key hedge fund action encompassing Blackbaud, Inc. (NASDAQ:BLKB).

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

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in BLKB a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Echo Street Capital Management held the most valuable stake in Blackbaud, Inc. (NASDAQ:BLKB), which was worth $63.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $8.1 million worth of shares. D E Shaw, Millennium Management, and GLG Partners 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 Echo Street Capital Management allocated the biggest weight to Blackbaud, Inc. (NASDAQ:BLKB), around 1.36% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.37 percent of its 13F equity portfolio to BLKB.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the biggest position in Blackbaud, Inc. (NASDAQ:BLKB). Marshall Wace LLP had $1.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $1.1 million position during the quarter. The following funds were also among the new BLKB investors: Greg Eisner’s Engineers Gate Manager, Peter Muller’s PDT Partners, and Hoon Kim’s Quantinno Capital.

Let’s also examine hedge fund activity in other stocks similar to Blackbaud, Inc. (NASDAQ:BLKB). These stocks are Sanderson Farms, Inc. (NASDAQ:SAFM), GW Pharmaceuticals plc (NASDAQ:GWPH), Schrodinger, Inc. (NASDAQ:SDGR), and H&R Block, Inc. (NYSE:HRB). This group of stocks’ market caps are similar to BLKB’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAFM 17 330385 -19
GWPH 21 262831 -3
SDGR 15 542132 15
HRB 19 177631 -11
Average 18 328245 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $328 million. That figure was $108 million in BLKB’s case. GW Pharmaceuticals plc (NASDAQ:GWPH) is the most popular stock in this table. On the other hand Schrodinger, Inc. (NASDAQ:SDGR) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Blackbaud, Inc. (NASDAQ:BLKB) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately BLKB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BLKB were disappointed as the stock returned 2.8% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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