Is Bandwidth Inc. (BAND) Going To Burn These Hedge Funds ?

Is Bandwidth Inc. (NASDAQ:BAND) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Bandwidth Inc. (NASDAQ:BAND) was in 20 hedge funds’ portfolios at the end of the third quarter of 2019. BAND shareholders have witnessed an increase in hedge fund sentiment of late. There were 18 hedge funds in our database with BAND holdings at the end of the previous quarter. 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 below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are many indicators market participants put to use to analyze publicly traded companies. A couple of the best indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can outperform the S&P 500 by a significant amount (see the details here).

William Graves Boardman Bay Capital

Will Graves of Boardman Bay Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the fresh hedge fund action surrounding Bandwidth Inc. (NASDAQ:BAND).

What does smart money think about Bandwidth Inc. (NASDAQ:BAND)?

At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2019. By comparison, 16 hedge funds held shares or bullish call options in BAND 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, Portolan Capital Management held the most valuable stake in Bandwidth Inc. (NASDAQ:BAND), which was worth $31.6 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $20.5 million worth of shares. Driehaus Capital, Alta Park Capital, and D E Shaw 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 6.76% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, earmarking 3.57 percent of its 13F equity portfolio to BAND.

Now, some big names have been driving this bullishness. Wexford Capital, managed by Charles Davidson and Joseph Jacobs, created the most valuable position in Bandwidth Inc. (NASDAQ:BAND). Wexford Capital had $3.1 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also initiated a $1.9 million position during the quarter. The other funds with brand new BAND positions are Will Graves’s Boardman Bay Capital Management, Ken Griffin’s Citadel Investment Group, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now review hedge fund activity in other stocks similar to Bandwidth Inc. (NASDAQ:BAND). We will take a look at MicroStrategy Incorporated (NASDAQ:MSTR), eHealth, Inc. (NASDAQ:EHTH), The Michaels Companies, Inc. (NASDAQ:MIK), and Peabody Energy Corporation (NYSE:BTU). All of these stocks’ market caps match BAND’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MSTR 20 164593 3
EHTH 21 278384 -5
MIK 21 76221 -5
BTU 31 725364 0
Average 23.25 311141 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $134 million in BAND’s case. Peabody Energy Corporation (NYSE:BTU) is the most popular stock in this table. On the other hand MicroStrategy Incorporated (NASDAQ:MSTR) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Bandwidth Inc. (NASDAQ:BAND) is even less popular than MSTR. Hedge funds dodged a bullet by taking a bearish stance towards BAND. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BAND wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BAND investors were disappointed as the stock returned -14.1% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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