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Is Barrett Business Services, Inc. (BBSI) Going to Burn These Hedge Funds?

During the first half of the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by about 4 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Barrett Business Services, Inc. (NASDAQ:BBSI) and see how the stock is affected by the recent hedge fund activity.

Is Barrett Business Services, Inc. (NASDAQ:BBSI) ready to rally soon? Money managers are betting on the stock. The number of bullish hedge fund bets went up by 4 recently. Our calculations also showed that BBSI isn’t among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

Let’s go over the key hedge fund action surrounding Barrett Business Services, Inc. (NASDAQ:BBSI).

What does the smart money think about Barrett Business Services, Inc. (NASDAQ:BBSI)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BBSI over the last 13 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

No of Hedge Funds BBSI Positions

More specifically, Renaissance Technologies was the largest shareholder of Barrett Business Services, Inc. (NASDAQ:BBSI), with a stake worth $27.5 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $12.9 million. GLG Partners, Millennium Management, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names were leading the bulls’ herd. Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, assembled the largest position in Barrett Business Services, Inc. (NASDAQ:BBSI). Blue Mountain Capital had $0.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s also examine hedge fund activity in other stocks similar to Barrett Business Services, Inc. (NASDAQ:BBSI). We will take a look at Collegium Pharmaceutical Inc (NASDAQ:COLL), pdvWireless Inc (NASDAQ:PDVW), Clearwater Paper Corp (NYSE:CLW), and Ultra Clean Holdings Inc (NASDAQ:UCTT). This group of stocks’ market caps are similar to BBSI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
COLL 15 103991 -2
PDVW 9 227471 0
CLW 10 25615 3
UCTT 8 27515 -2
Average 10.5 96148 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $61 million in BBSI’s case. Collegium Pharmaceutical Inc (NASDAQ:COLL) is the most popular stock in this table. On the other hand Ultra Clean Holdings Inc (NASDAQ:UCTT) is the least popular one with only 8 bullish hedge fund positions. Barrett Business Services, Inc. (NASDAQ:BBSI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard COLL might be a better candidate to consider a long position.

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

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