The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of September 30th, 2020. What do these smart investors think about BMC Stock Holdings, Inc. (NASDAQ:BMCH)?
Is BMCH a good stock to buy? BMC Stock Holdings, Inc. (NASDAQ:BMCH) has seen an increase in support from the world’s most elite money managers of late. BMC Stock Holdings, Inc. (NASDAQ:BMCH) was in 31 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BMCH isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. Now we’re going to take a peek at the recent hedge fund action regarding BMC Stock Holdings, Inc. (NASDAQ:BMCH).
Do Hedge Funds Think BMCH Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in BMCH a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in BMC Stock Holdings, Inc. (NASDAQ:BMCH) was held by Coliseum Capital, which reported holding $274.5 million worth of stock at the end of September. It was followed by Magnetar Capital with a $85 million position. Other investors bullish on the company included Arrowstreet Capital, Renaissance Technologies, and One Fin Capital Management. In terms of the portfolio weights assigned to each position Coliseum Capital allocated the biggest weight to BMC Stock Holdings, Inc. (NASDAQ:BMCH), around 29.35% of its 13F portfolio. One Fin Capital Management is also relatively very bullish on the stock, designating 11.61 percent of its 13F equity portfolio to BMCH.
Now, specific money managers were leading the bulls’ herd. Magnetar Capital, managed by Alec Litowitz and Ross Laser, initiated the most outsized position in BMC Stock Holdings, Inc. (NASDAQ:BMCH). Magnetar Capital had $85 million invested in the company at the end of the quarter. John Orrico’s Water Island Capital also made a $16.7 million investment in the stock during the quarter. The other funds with brand new BMCH positions are Richard Driehaus’s Driehaus Capital, Robert Emil Zoellner’s Alpine Associates, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as BMC Stock Holdings, Inc. (NASDAQ:BMCH) but similarly valued. We will take a look at Momo Inc (NASDAQ:MOMO), Digital Turbine Inc (NASDAQ:APPS), Univar Solutions Inc (NYSE:UNVR), EnerSys (NYSE:ENS), Sorrento Therapeutics Inc (NASDAQ:SRNE), NCR Corporation (NYSE:NCR), and Cogent Communications Holdings Inc. (NASDAQ:CCOI). All of these stocks’ market caps resemble BMCH’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.4 hedge funds with bullish positions and the average amount invested in these stocks was $348 million. That figure was $571 million in BMCH’s case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand Sorrento Therapeutics Inc (NASDAQ:SRNE) is the least popular one with only 13 bullish hedge fund positions. BMC Stock Holdings, Inc. (NASDAQ:BMCH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BMCH is 87.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on BMCH as the stock returned 20.7% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.