Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Black Knight, Inc. (NYSE:BKI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is BKI a good stock to buy now? The smart money was taking a pessimistic view. The number of bullish hedge fund positions dropped by 3 in recent months. Black Knight, Inc. (NYSE:BKI) was in 41 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 45. Our calculations also showed that BKI 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).
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 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 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 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.
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. With all of this in mind we’re going to view the latest hedge fund action regarding Black Knight, Inc. (NYSE:BKI).
Do Hedge Funds Think BKI Is A Good Stock To Buy Now?
At Q3’s end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the second quarter of 2020. On the other hand, there were a total of 45 hedge funds with a bullish position in BKI a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, D E Shaw held the most valuable stake in Black Knight, Inc. (NYSE:BKI), which was worth $209.4 million at the end of the third quarter. On the second spot was Third Point which amassed $152.3 million worth of shares. Junto Capital Management, Citadel Investment Group, and Echo Street 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 Banbury Partners allocated the biggest weight to Black Knight, Inc. (NYSE:BKI), around 9.23% of its 13F portfolio. Aravt Global is also relatively very bullish on the stock, setting aside 8 percent of its 13F equity portfolio to BKI.
Since Black Knight, Inc. (NYSE:BKI) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there were a few fund managers that elected to cut their full holdings in the third quarter. It’s worth mentioning that Zach Petrone’s Highside Global Management cut the largest stake of the 750 funds monitored by Insider Monkey, totaling about $7 million in stock. Matthew L Pinz’s fund, Pinz Capital, also sold off its stock, about $3.2 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Black Knight, Inc. (NYSE:BKI) but similarly valued. These stocks are Magna International Inc. (NYSE:MGA), Burlington Stores Inc (NYSE:BURL), MongoDB, Inc. (NASDAQ:MDB), Nucor Corporation (NYSE:NUE), Zebra Technologies Corporation (NASDAQ:ZBRA), Kirkland Lake Gold Ltd. (NYSE:KL), and Markel Corporation (NYSE:MKL). This group of stocks’ market caps are similar to BKI’s market cap.
|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 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $769 million. That figure was $947 million in BKI’s case. Zebra Technologies Corporation (NASDAQ:ZBRA) is the most popular stock in this table. On the other hand Magna International Inc. (NYSE:MGA) is the least popular one with only 21 bullish hedge fund positions. Black Knight, Inc. (NYSE:BKI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BKI is 72.8. 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 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately BKI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BKI were disappointed as the stock returned 1% since the end of September (through 12/14) 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.
Disclosure: None. This article was originally published at Insider Monkey.