Is BlackRock, Inc. (BLK) Going to Burn These Hedge Funds?

In this article we will check out the progression of hedge fund sentiment towards BlackRock, Inc. (NYSE:BLK) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

BlackRock, Inc. (NYSE:BLK) shareholders have witnessed an increase in hedge fund interest lately. BlackRock, Inc. (NYSE:BLK) was in 47 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 53. There were 42 hedge funds in our database with BLK positions at the end of the first quarter. Our calculations also showed that BLK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

According to most market participants, hedge funds are viewed as worthless, outdated investment tools of the past. While there are greater than 8000 funds with their doors open at present, Our experts look at the moguls of this club, around 850 funds. Most estimates calculate that this group of people manage most of the hedge fund industry’s total asset base, and by paying attention to their best stock picks, Insider Monkey has spotted a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Tom Gayner

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. With all of this in mind let’s take a look at the key hedge fund action encompassing BlackRock, Inc. (NYSE:BLK).

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

Heading into the third quarter of 2021, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BLK over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’s AQR Capital Management has the biggest position in BlackRock, Inc. (NYSE:BLK), worth close to $214.1 million, accounting for 0.4% of its total 13F portfolio. The second largest stake is held by Markel Gayner Asset Management, led by Tom Gayner, holding a $192.7 million position; 2.5% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish contain Ken Griffin’s Citadel Investment Group, Ken Fisher’s Fisher Asset Management and James Parsons’s Junto Capital Management. In terms of the portfolio weights assigned to each position Ivy Lane Capital allocated the biggest weight to BlackRock, Inc. (NYSE:BLK), around 13.31% of its 13F portfolio. Heard Capital is also relatively very bullish on the stock, setting aside 7.47 percent of its 13F equity portfolio to BLK.

As one would reasonably expect, specific money managers have been driving this bullishness. Sandler Capital Management, managed by Andrew Sandler, assembled the biggest position in BlackRock, Inc. (NYSE:BLK). Sandler Capital Management had $6.7 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $6.5 million position during the quarter. The other funds with new positions in the stock are Sander Gerber’s Hudson Bay Capital Management, Qing Li’s Sciencast Management, and Karim Abbadi and Edward McBride’s Centiva Capital.

Let’s go over hedge fund activity in other stocks similar to BlackRock, Inc. (NYSE:BLK). We will take a look at American Express Company (NYSE:AXP), Starbucks Corporation (NASDAQ:SBUX), Sanofi (NASDAQ:SNY), International Business Machines Corp. (NYSE:IBM), Applied Materials, Inc. (NASDAQ:AMAT), Raytheon Technologies Corp (NYSE:RTX), and The Goldman Sachs Group, Inc. (NYSE:GS). This group of stocks’ market valuations are similar to BLK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AXP 52 28660485 -1
SBUX 63 4757968 2
SNY 16 1261299 1
IBM 41 1373521 0
AMAT 73 4594094 -5
RTX 53 2112283 -5
GS 61 5183843 -16
Average 51.3 6849070 -3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 51.3 hedge funds with bullish positions and the average amount invested in these stocks was $6849 million. That figure was $1283 million in BLK’s case. Applied Materials, Inc. (NASDAQ:AMAT) is the most popular stock in this table. On the other hand Sanofi (NASDAQ:SNY) is the least popular one with only 16 bullish hedge fund positions. BlackRock, Inc. (NYSE:BLK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BLK is 63.8. 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 negative signal and 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 22.9% in 2021 through October 1st and surpassed the market again by 5.6 percentage points. Unfortunately BLK wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BLK investors were disappointed as the stock returned -3.4% since the end of June (through 10/1) 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 most of these stocks already outperformed the market in 2021.

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