How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Boston Omaha Corporation (NASDAQ:BOMN).
Boston Omaha Corporation (NASDAQ:BOMN) was in 5 hedge funds’ portfolios at the end of September. The all time high for this statistics is 12. BOMN has seen a decrease in hedge fund interest of late. There were 12 hedge funds in our database with BOMN holdings at the end of June. Our calculations also showed that BOMN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a glance at the fresh hedge fund action encompassing Boston Omaha Corporation (NASDAQ:BOMN).
What have hedge funds been doing with Boston Omaha Corporation (NASDAQ:BOMN)?
At the end of September, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of -58% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BOMN over the last 21 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, Magnolia Capital Fund held the most valuable stake in Boston Omaha Corporation (NASDAQ:BOMN), which was worth $162 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $2.1 million worth of shares. Renaissance Technologies, Winton Capital Management, and AQR Capital Management 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 Magnolia Capital Fund allocated the biggest weight to Boston Omaha Corporation (NASDAQ:BOMN), around 23.63% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.02 percent of its 13F equity portfolio to BOMN.
Due to the fact that Boston Omaha Corporation (NASDAQ:BOMN) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedgies that slashed their entire stakes last quarter. At the top of the heap, Israel Englander’s Millennium Management dumped the largest stake of all the hedgies followed by Insider Monkey, valued at an estimated $1.9 million in stock. Phillip Goldstein, Andrew Dakos and Steven Samuels’s fund, Bulldog Investors, also dumped its stock, about $1.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 7 funds last quarter.
Let’s also examine hedge fund activity in other stocks similar to Boston Omaha Corporation (NASDAQ:BOMN). We will take a look at Catchmark Timber Trust Inc (NYSE:CTT), Aegion Corp (NASDAQ:AEGN), Mercer International Inc. (NASDAQ:MERC), Altimmune, Inc. (NASDAQ:ALT), Cambium Networks Corporation (NASDAQ:CMBM), Byline Bancorp, Inc. (NYSE:BY), and McEwen Mining Inc (NYSE:MUX). This group of stocks’ market values match BOMN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTT | 13 | 53862 | 4 |
| AEGN | 9 | 13719 | -1 |
| MERC | 13 | 82614 | 3 |
| ALT | 18 | 144736 | 6 |
| CMBM | 6 | 4612 | 4 |
| BY | 7 | 8582 | -1 |
| MUX | 10 | 5331 | 1 |
| Average | 10.9 | 44779 | 2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.9 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $166 million in BOMN’s case. Altimmune, Inc. (NASDAQ:ALT) is the most popular stock in this table. On the other hand Cambium Networks Corporation (NASDAQ:CMBM) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Boston Omaha Corporation (NASDAQ:BOMN) is even less popular than CMBM. Our overall hedge fund sentiment score for BOMN is 10.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on BOMN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on BOMN as the stock returned 42.6% since Q3 (through November 27th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
