Here is What Hedge Funds Think About Black Hills Corporation (BKH)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Black Hills Corporation (NYSE:BKH) and determine whether the smart money was really smart about this stock.

Black Hills Corporation (NYSE:BKH) was in 22 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 24. BKH has experienced an increase in enthusiasm from smart money in recent months. There were 18 hedge funds in our database with BKH holdings at the end of March. Our calculations also showed that BKH isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In today’s marketplace there are a multitude of indicators shareholders employ to analyze their stock investments. A pair of the less utilized indicators are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can beat the S&P 500 by a superb amount (see the details here).

Mario Gabelli of GAMCO Investors

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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind let’s take a peek at the key hedge fund action regarding Black Hills Corporation (NYSE:BKH).

How have hedgies been trading Black Hills Corporation (NYSE:BKH)?

Heading into the third quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in BKH 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, Renaissance Technologies held the most valuable stake in Black Hills Corporation (NYSE:BKH), which was worth $79 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $35.8 million worth of shares. Millennium Management, GAMCO Investors, and ExodusPoint Capital 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 Newtyn Management allocated the biggest weight to Black Hills Corporation (NYSE:BKH), around 1.04% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, earmarking 0.43 percent of its 13F equity portfolio to BKH.

Consequently, key hedge funds were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, assembled the most outsized position in Black Hills Corporation (NYSE:BKH). ExodusPoint Capital had $4.1 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new BKH investors: Mika Toikka’s AlphaCrest Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Karim Abbadi and Edward McBride’s Centiva Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Black Hills Corporation (NYSE:BKH) but similarly valued. These stocks are Braskem SA (NYSE:BAK), Physicians Realty Trust (NYSE:DOC), Hamilton Lane Incorporated (NASDAQ:HLNE), Agree Realty Corporation (NYSE:ADC), Regal Beloit Corporation (NYSE:RBC), Power Integrations Inc (NASDAQ:POWI), and Madison Square Garden Sports Corp. (NYSE:MSGS). This group of stocks’ market values are similar to BKH’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BAK 7 36296 1
DOC 15 106429 -1
HLNE 19 118594 10
ADC 16 300188 -5
RBC 22 258249 3
POWI 17 89358 -4
MSGS 43 965570 2
Average 19.9 267812 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $268 million. That figure was $182 million in BKH’s case. Madison Square Garden Sports Corp. (NYSE:MSGS) is the most popular stock in this table. On the other hand Braskem SA (NYSE:BAK) is the least popular one with only 7 bullish hedge fund positions. Black Hills Corporation (NYSE:BKH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BKH is 57.3. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately BKH wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BKH were disappointed as the stock returned -4.7% in Q3 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 many of these stocks already outperformed the market so far this year.

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