The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Bandwidth Inc. (NASDAQ:BAND).
Is BAND a good stock to buy? Bandwidth Inc. (NASDAQ:BAND) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 30 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that BAND 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). At the end of this article we will also compare BAND to other stocks including Texas Roadhouse Inc (NASDAQ:TXRH), PennyMac Financial Services Inc (NYSE:PFSI), and II-VI, Inc. (NASDAQ:IIVI) to get a better sense of its popularity.
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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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 review the recent hedge fund action encompassing Bandwidth Inc. (NASDAQ:BAND).
Do Hedge Funds Think BAND Is A Good Stock To Buy Now?
At third quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 20 hedge funds with a bullish position in BAND a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Driehaus Capital was the largest shareholder of Bandwidth Inc. (NASDAQ:BAND), with a stake worth $58.3 million reported as of the end of September. Trailing Driehaus Capital was Point72 Asset Management, which amassed a stake valued at $45.3 million. Royce & Associates, Alta Park Capital, and Renaissance Technologies 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 Alta Park Capital allocated the biggest weight to Bandwidth Inc. (NASDAQ:BAND), around 6.08% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, dishing out 2.46 percent of its 13F equity portfolio to BAND.
Seeing as Bandwidth Inc. (NASDAQ:BAND) has witnessed falling interest from the aggregate hedge fund industry, we can see that there is a sect of money managers that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, Jerry Kochanski’s Shelter Haven Capital Management sold off the largest stake of the 750 funds watched by Insider Monkey, comprising about $14.1 million in stock. Brian Ashford-Russell and Tim Woolley’s fund, Polar Capital, also dumped its stock, about $8.4 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Bandwidth Inc. (NASDAQ:BAND) but similarly valued. We will take a look at Texas Roadhouse Inc (NASDAQ:TXRH), PennyMac Financial Services Inc (NYSE:PFSI), II-VI, Inc. (NASDAQ:IIVI), OneMain Holdings Inc (NYSE:OMF), MAXIMUS, Inc. (NYSE:MMS), DouYu International Holdings Limited (NASDAQ:DOYU), and Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC). This group of stocks’ market valuations resemble BAND’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $240 million. That figure was $344 million in BAND’s case. OneMain Holdings Inc (NYSE:OMF) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 5 bullish hedge fund positions. Bandwidth Inc. (NASDAQ:BAND) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BAND is 76.9. 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 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 33.3% in 2020 through December 18th and beat the market again by 16.4 percentage points. Unfortunately BAND wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BAND were disappointed as the stock returned 3.2% since the end of September (through 12/18) 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 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.