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Were Hedge Funds Right About Dumping Bandwidth Inc. (BAND)?

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by 4 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Bandwidth Inc. (NASDAQ:BAND).

Bandwidth Inc. (NASDAQ:BAND) has seen a decrease in activity from the world’s largest hedge funds of late. BAND was in 18 hedge funds’ portfolios at the end of the second quarter of 2019. There were 23 hedge funds in our database with BAND positions at the end of the previous quarter. Our calculations also showed that BAND isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of gauges shareholders use to evaluate publicly traded companies. A couple of the less utilized gauges are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best fund managers can trounce the market by a superb margin (see the details here).

BAND_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the key hedge fund action regarding Bandwidth Inc. (NASDAQ:BAND).

How are hedge funds trading Bandwidth Inc. (NASDAQ:BAND)?

At Q2’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the first quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in BAND a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

AQR CAPITAL MANAGEMENT

The largest stake in Bandwidth Inc. (NASDAQ:BAND) was held by Portolan Capital Management, which reported holding $48.5 million worth of stock at the end of March. It was followed by Driehaus Capital with a $21.7 million position. Other investors bullish on the company included Point72 Asset Management, D E Shaw, and Alta Park Capital.

Judging by the fact that Bandwidth Inc. (NASDAQ:BAND) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds that elected to cut their entire stakes heading into Q3. At the top of the heap, Mark Moore’s ThornTree Capital Partners said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, totaling about $4.7 million in stock. John Burbank’s fund, Passport Capital, also said goodbye to its stock, about $3.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q3.

Let’s now review hedge fund activity in other stocks similar to Bandwidth Inc. (NASDAQ:BAND). These stocks are Supernus Pharmaceuticals Inc (NASDAQ:SUPN), Aphria Inc. (NYSE:APHA), Change Healthcare Inc. (NASDAQ:CHNG), and Regenxbio Inc (NASDAQ:RGNX). All of these stocks’ market caps are closest to BAND’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SUPN 16 93537 -6
APHA 5 5186 -4
CHNG 29 274010 29
RGNX 14 219288 -5
Average 16 148005 3.5

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 $148 million. That figure was $184 million in BAND’s case. Change Healthcare Inc. (NASDAQ:CHNG) is the most popular stock in this table. On the other hand Aphria Inc. (NYSE:APHA) is the least popular one with only 5 bullish hedge fund positions. Bandwidth Inc. (NASDAQ:BAND) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BAND wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BAND were disappointed as the stock returned -13.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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