Is Black Knight, Inc. (BKI) Going to Burn These Hedge Funds?

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Black Knight, Inc. (NYSE:BKI) based on those filings.

Black Knight, Inc. (NYSE:BKI) was in 32 hedge funds’ portfolios at the end of the first quarter of 2020. BKI shareholders have witnessed an increase in enthusiasm from smart money in recent months. There were 31 hedge funds in our database with BKI holdings at the end of the previous quarter. Our calculations also showed that BKI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

To the average investor there are plenty of signals investors have at their disposal to assess stocks. Some of the most under-the-radar signals are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the best hedge fund managers can outclass the market by a solid amount (see the details here).

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the recent hedge fund action encompassing Black Knight, Inc. (NYSE:BKI).

What does smart money think about Black Knight, Inc. (NYSE:BKI)?

Heading into the second quarter of 2020, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BKI over the last 18 quarters. So, let’s review 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 $165.5 million at the end of the third quarter. On the second spot was Echo Street Capital Management which amassed $35.6 million worth of shares. Wallace R. Weitz & Co., Aravt Global, and Two Sigma Advisors 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 11.12% of its 13F portfolio. Lionstone Capital Management is also relatively very bullish on the stock, dishing out 7.01 percent of its 13F equity portfolio to BKI.

As aggregate interest increased, key money managers were leading the bulls’ herd. Highside Global Management, managed by Zach Petrone, initiated the most outsized position in Black Knight, Inc. (NYSE:BKI). Highside Global Management had $10.1 million invested in the company at the end of the quarter. Vikas Lunia’s Lunia Capital also initiated a $7.6 million position during the quarter. The following funds were also among the new BKI investors: Dmitry Balyasny’s Balyasny Asset Management, Renaissance Technologies, and Greg Eisner’s Engineers Gate Manager.

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. We will take a look at Cypress Semiconductor Corporation (NASDAQ:CY), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Principal Financial Group Inc (NASDAQ:PFG), and DENTSPLY SIRONA Inc. (NASDAQ:XRAY). This group of stocks’ market values resemble BKI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CY 46 2083415 10
CHRW 32 247903 8
PFG 27 118834 7
XRAY 30 996924 2
Average 33.75 861769 6.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.75 hedge funds with bullish positions and the average amount invested in these stocks was $862 million. That figure was $372 million in BKI’s case. Cypress Semiconductor Corporation (NASDAQ:CY) is the most popular stock in this table. On the other hand Principal Financial Group Inc (NASDAQ:PFG) is the least popular one with only 27 bullish hedge fund positions. Black Knight, Inc. (NYSE:BKI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on BKI as the stock returned 32.6% during the second quarter and outperformed the market by an even larger margin.

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