Should You Avoid BlackLine, Inc. (BL)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like BlackLine, Inc. (NASDAQ:BL).

BlackLine, Inc. (NASDAQ:BL) shareholders have witnessed a decrease in enthusiasm from smart money of late. BL was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with BL positions at the end of the previous quarter. Our calculations also showed that BL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To most traders, hedge funds are viewed as underperforming, old investment vehicles of yesteryear. While there are over 8000 funds trading at present, Our researchers look at the elite of this club, around 750 funds. It is estimated that this group of investors have their hands on the lion’s share of the hedge fund industry’s total capital, and by tailing their unrivaled investments, Insider Monkey has identified numerous investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

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. Let’s analyze the recent hedge fund action encompassing BlackLine, Inc. (NASDAQ:BL).

How have hedgies been trading BlackLine, Inc. (NASDAQ:BL)?

At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in BL a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is BL A Good Stock To Buy?

The largest stake in BlackLine, Inc. (NASDAQ:BL) was held by D E Shaw, which reported holding $66.2 million worth of stock at the end of September. It was followed by Millennium Management with a $26.9 million position. Other investors bullish on the company included Two Sigma Advisors, Renaissance Technologies, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Tenzing Global Investors allocated the biggest weight to BlackLine, Inc. (NASDAQ:BL), around 0.25% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to BL.

Since BlackLine, Inc. (NASDAQ:BL) has experienced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that slashed their positions entirely heading into Q4. It’s worth mentioning that Brett Barakett’s Tremblant Capital dropped the biggest stake of the 750 funds monitored by Insider Monkey, worth an estimated $11.5 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also dropped its stock, about $1.9 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to BlackLine, Inc. (NASDAQ:BL). We will take a look at Genesis Energy, L.P. (NYSE:GEL), Piedmont Office Realty Trust, Inc. (NYSE:PDM), Monro Muffler Brake Inc (NASDAQ:MNRO), and Retail Properties of America Inc (NYSE:RPAI). This group of stocks’ market caps resemble BL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GEL 2 21756 -2
PDM 8 83825 -4
MNRO 16 192706 2
RPAI 21 240383 7
Average 11.75 134668 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $135 million. That figure was $125 million in BL’s case. Retail Properties of America Inc (NYSE:RPAI) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 2 bullish hedge fund positions. BlackLine, Inc. (NASDAQ:BL) 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 BL as the stock returned 12.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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