Is Blackrock Capital Investment Corp. (BKCC) Worthy of Your Portfolio?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge funds have been producing disappointing net returns in recent years, however that was partly due to the poor performance of small-cap stocks in general. Well, small-cap stocks finally turned the corner and have been beating the large-cap stocks by more than 10 percentage points over the last 5 months.This means the relevancy of hedge funds’ public filings became inarguable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Blackrock Capital Investment Corp. (NASDAQ:BKCC).

Blackrock Capital Investment Corp. (NASDAQ:BKCC) investors should pay attention to an increase in hedge fund sentiment lately. There were 10 hedge funds in our database with BKCC positions at the end of September. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CVR Partners LP (NYSE:UAN), FARO Technologies, Inc. (NASDAQ:FARO), and Cryolife Inc (NYSE:CRY) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading Blackrock Capital Investment Corp. (NASDAQ:BKCC)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, compared to eight funds at the end of June. On the other hand, there were a total of seven hedge funds with a bullish position in BKCC at the beginning of this year. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Robert Raiff’s Raiff Partners holds the number one position in Blackrock Capital Investment Corp. (NASDAQ:BKCC). Raiff Partners has a $1.9 million position in the stock, comprising 2.4% of its 13F portfolio. The second most bullish fund manager is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $1.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions contain Israel Englander’s Millennium Management, one of the largest hedge funds in the world, D. E. Shaw’s D E Shaw, and Peter Muller’s PDT Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now, some big names have been driving this bullishness. HBK Investments, led by David Costen Haley, initiated the most valuable position in Blackrock Capital Investment Corp. (NASDAQ:BKCC). HBK Investments had $0.1 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new BKCC position is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Blackrock Capital Investment Corp. (NASDAQ:BKCC) but similarly valued. We will take a look at CVR Partners LP (NYSE:UAN), FARO Technologies, Inc. (NASDAQ:FARO), Cryolife Inc (NYSE:CRY), and CBIZ, Inc. (NYSE:CBZ). This group of stocks’ market valuations match BKCC’s market valuation.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $6 million in BKCC’s case. CBIZ, Inc. (NYSE:CBZ) is the most popular stock in this table. On the other hand CVR Partners LP (NYSE:UAN) is the least popular one with only four bullish hedge fund positions. Blackrock Capital Investment Corp. (NASDAQ:BKCC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CBZ might be a better candidate to consider taking a long position in.

Disclosure: none