Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Blucora Inc (NASDAQ:BCOR) from the perspective of those elite funds.
Is Blucora Inc (NASDAQ:BCOR) an exceptional investment now? Hedge funds are selling. The number of bullish hedge fund bets shrunk by 2 recently. Our calculations also showed that BCOR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a peek at the new hedge fund action encompassing Blucora Inc (NASDAQ:BCOR).
How are hedge funds trading Blucora Inc (NASDAQ:BCOR)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BCOR over the last 17 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the most valuable position in Blucora Inc (NASDAQ:BCOR), worth close to $59.9 million, comprising 0.1% of its total 13F portfolio. On Renaissance Technologies’s heels is D E Shaw, led by David E. Shaw, holding a $14.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions comprise Ken Griffin’s Citadel Investment Group, Ravi Chopra’s Azora Capital and Paul Marshall and Ian Wace’s Marshall Wace. In terms of the portfolio weights assigned to each position Red Cedar Management allocated the biggest weight to Blucora Inc (NASDAQ:BCOR), around 1.98% of its 13F portfolio. Azora Capital is also relatively very bullish on the stock, dishing out 1.13 percent of its 13F equity portfolio to BCOR.
Seeing as Blucora Inc (NASDAQ:BCOR) has experienced a decline in interest from hedge fund managers, logic holds that there exists a select few hedge funds that slashed their full holdings by the end of the third quarter. It’s worth mentioning that Jeffrey Jacobowitz’s Simcoe Capital Management said goodbye to the largest investment of the 750 funds watched by Insider Monkey, valued at close to $2 million in stock, and Peter S. Park’s Park West Asset Management was right behind this move, as the fund dropped about $1.4 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Blucora Inc (NASDAQ:BCOR) but similarly valued. These stocks are Sangamo Therapeutics, Inc. (NASDAQ:SGMO), KEMET Corporation (NYSE:KEM), Mesa Laboratories, Inc. (NASDAQ:MLAB), and Victory Capital Holdings, Inc. (NASDAQ:VCTR). All of these stocks’ market caps are closest to BCOR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SGMO | 14 | 55789 | -3 |
| KEM | 18 | 180934 | 0 |
| MLAB | 8 | 97695 | 0 |
| VCTR | 12 | 48212 | 0 |
| Average | 13 | 95658 | -0.75 |
View table here if you experience formatting issues.
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 $96 million. That figure was $100 million in BCOR’s case. KEMET Corporation (NYSE:KEM) is the most popular stock in this table. On the other hand Mesa Laboratories, Inc. (NASDAQ:MLAB) is the least popular one with only 8 bullish hedge fund positions. Blucora Inc (NASDAQ:BCOR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on BCOR, though not to the same extent, as the stock returned 8.8% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
