Were Hedge Funds Right About Bill.com Holdings, Inc. (BILL)?

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. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Bill.com Holdings, Inc. (NYSE:BILL) and determine whether the smart money was really smart about this stock.

Bill.com Holdings, Inc. (NYSE:BILL) shareholders have witnessed a decrease in hedge fund sentiment recently. Our calculations also showed that BILL isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

To most shareholders, hedge funds are seen as slow, old financial vehicles of the past. While there are greater than 8000 funds trading at present, Our researchers look at the masters of this club, around 850 funds. Most estimates calculate that this group of people direct the majority of all hedge funds’ total capital, and by following their matchless stock picks, Insider Monkey has formulated a number of investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Jorge Paulo Lemann of 3G Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so if you have any good ideas send us an email. Keeping this in mind we’re going to take a glance at the key hedge fund action regarding Bill.com Holdings, Inc. (NYSE:BILL).

How have hedgies been trading Bill.com Holdings, Inc. (NYSE:BILL)?

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in BILL a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Bill.com Holdings, Inc. (NYSE:BILL) was held by Napier Park Global Capital, which reported holding $162.6 million worth of stock at the end of September. It was followed by Abdiel Capital Advisors with a $87.1 million position. Other investors bullish on the company included Whale Rock Capital Management, Echo Street Capital Management, and MIG Capital. In terms of the portfolio weights assigned to each position Napier Park Global Capital allocated the biggest weight to Bill.com Holdings, Inc. (NYSE:BILL), around 73.85% of its 13F portfolio. 3G Capital is also relatively very bullish on the stock, designating 13.04 percent of its 13F equity portfolio to BILL.

Seeing as Bill.com Holdings, Inc. (NYSE:BILL) has experienced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there is a sect of hedge funds that slashed their entire stakes heading into Q4. At the top of the heap, Ken Griffin’s Citadel Investment Group dropped the biggest position of the 750 funds tracked by Insider Monkey, totaling about $16.6 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dumped about $11.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 10 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Bill.com Holdings, Inc. (NYSE:BILL) but similarly valued. We will take a look at Semtech Corporation (NASDAQ:SMTC), EQM Midstream Partners, LP (NYSE:EQM), The Timken Company (NYSE:TKR), and Shenandoah Telecommunications Company (NASDAQ:SHEN). All of these stocks’ market caps are similar to BILL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SMTC 17 145584 5
EQM 6 15334 -5
TKR 30 262596 -10
SHEN 11 97332 1
Average 16 130212 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $385 million in BILL’s case. The Timken Company (NYSE:TKR) is the most popular stock in this table. On the other hand EQM Midstream Partners, LP (NYSE:EQM) is the least popular one with only 6 bullish hedge fund positions. Bill.com Holdings, Inc. (NYSE:BILL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on BILL as the stock returned 163.8% in Q2 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.