Is Black Knight, Inc. (BKI) A Good Stock To Buy?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Black Knight, Inc. (NYSE:BKI).

Is BKI a good stock to buy? Investors who are in the know were in an optimistic mood. The number of bullish hedge fund positions increased by 5 recently. Black Knight, Inc. (NYSE:BKI) was in 38 hedge funds’ portfolios at the end of the third quarter of 2021. 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).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a look at the latest hedge fund action surrounding Black Knight, Inc. (NYSE:BKI).

Third Point

Dan Loeb of Third Point

Do Hedge Funds Think BKI Is A Good Stock To Buy Now?

At the end of September, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BKI over the last 25 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

The largest stake in Black Knight, Inc. (NYSE:BKI) was held by Third Point, which reported holding $129.6 million worth of stock at the end of September. It was followed by Echo Street Capital Management with a $114.4 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Junto Capital Management. In terms of the portfolio weights assigned to each position Lionstone Capital Management allocated the biggest weight to Black Knight, Inc. (NYSE:BKI), around 8.97% of its 13F portfolio. Aravt Global is also relatively very bullish on the stock, earmarking 8.88 percent of its 13F equity portfolio to BKI.

As industrywide interest jumped, specific money managers have jumped into Black Knight, Inc. (NYSE:BKI) headfirst. Junto Capital Management, managed by James Parsons, established the most outsized position in Black Knight, Inc. (NYSE:BKI). Junto Capital Management had $43.2 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $20.7 million investment in the stock during the quarter. The other funds with brand new BKI positions are Peter Seuss’s Prana Capital Management, Greg Eisner’s Engineers Gate Manager, and Jinghua Yan’s TwinBeech Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Black Knight, Inc. (NYSE:BKI) but similarly valued. These stocks are Snap-on Incorporated (NYSE:SNA), Targa Resources Corp (NYSE:TRGP), Robert Half International Inc. (NYSE:RHI), UWM Holdings Corporation (NYSE:UWMC), Morningstar, Inc. (NASDAQ:MORN), Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR), and Invesco Ltd. (NYSE:IVZ). This group of stocks’ market valuations resemble BKI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNA 29 551227 -2
TRGP 26 567252 0
RHI 27 318494 4
UWMC 16 32122 -4
MORN 26 1645201 2
EBR 6 3756 1
IVZ 38 1355213 -2
Average 24 639038 -0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $639 million. That figure was $775 million in BKI’s case. Invesco Ltd. (NYSE:IVZ) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. – Eletrobrás (NYSE:EBR) is the least popular one with only 6 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 85.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately BKI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BKI were disappointed as the stock returned -0.7% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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