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Hedge Funds Got Out Of BOK Financial Corporation (BOKF) Just In Time

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (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. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about BOK Financial Corporation (NASDAQ:BOKF).

BOK Financial Corporation (NASDAQ:BOKF) was in 15 hedge funds’ portfolios at the end of December. BOKF investors should be aware of a decrease in activity from the world’s largest hedge funds lately. There were 17 hedge funds in our database with BOKF positions at the end of the previous quarter. Our calculations also showed that BOKF isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

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 we’re going to take a look at the key hedge fund action surrounding BOK Financial Corporation (NASDAQ:BOKF).

What have hedge funds been doing with BOK Financial Corporation (NASDAQ:BOKF)?

At the end of the fourth quarter, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in BOKF a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Among these funds, Ariel Investments held the most valuable stake in BOK Financial Corporation (NASDAQ:BOKF), which was worth $106.5 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $56.3 million worth of shares. Royce & Associates, Millennium Management, and PEAK6 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 Ariel Investments allocated the biggest weight to BOK Financial Corporation (NASDAQ:BOKF), around 1.34% of its 13F portfolio. Prescott Group Capital Management is also relatively very bullish on the stock, earmarking 0.6 percent of its 13F equity portfolio to BOKF.

Since BOK Financial Corporation (NASDAQ:BOKF) has witnessed bearish sentiment from the smart money, we can see that there exists a select few hedge funds that elected to cut their entire stakes last quarter. Intriguingly, Minhua Zhang’s Weld Capital Management cut the biggest investment of all the hedgies tracked by Insider Monkey, totaling close to $1.6 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to BOK Financial Corporation (NASDAQ:BOKF). These stocks are Hexcel Corporation (NYSE:HXL), Sonoco Products Company (NYSE:SON), Syneos Health, Inc. (NASDAQ:SYNH), and LATAM Airlines Group S.A. (NYSE:LTM). All of these stocks’ market caps resemble BOKF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HXL 30 103264 3
SON 24 112367 0
SYNH 20 185269 -1
LTM 14 33316 4
Average 22 108554 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $206 million in BOKF’s case. Hexcel Corporation (NYSE:HXL) is the most popular stock in this table. On the other hand LATAM Airlines Group S.A. (NYSE:LTM) is the least popular one with only 14 bullish hedge fund positions. BOK Financial Corporation (NASDAQ:BOKF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market by 5.5 percentage points. Unfortunately BOKF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); BOKF investors were disappointed as the stock returned -50.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
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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