Were Hedge Funds Right About Selling BlackRock, Inc. (BLK)?

Is BlackRock, Inc. (NYSE:BLK) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

BlackRock, Inc. (NYSE:BLK) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that BLK isn’t among the 30 most popular stocks among hedge funds (see the video at the end of this article).

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Tom Gayner

Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 review the key hedge fund action surrounding BlackRock, Inc. (NYSE:BLK).

Hedge fund activity in BlackRock, Inc. (NYSE:BLK)

At Q2’s end, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BLK over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with BLK Positions

Among these funds, Junto Capital Management held the most valuable stake in BlackRock, Inc. (NYSE:BLK), which was worth $116.1 million at the end of the second quarter. On the second spot was Markel Gayner Asset Management which amassed $99.9 million worth of shares. Moreover, Adage Capital Management, Fisher Asset Management, and Balyasny Asset Management were also bullish on BlackRock, Inc. (NYSE:BLK), allocating a large percentage of their portfolios to this stock.

Judging by the fact that BlackRock, Inc. (NYSE:BLK) has faced bearish sentiment from the smart money, we can see that there exists a select few hedgies who sold off their full holdings heading into Q3. Interestingly, Jim Simons’s Renaissance Technologies said goodbye to the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising close to $54.3 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund sold off about $19.8 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds heading into Q3.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as BlackRock, Inc. (NYSE:BLK) but similarly valued. We will take a look at China Life Insurance Company Limited (NYSE:LFC), Anthem Inc (NYSE:ANTM), CME Group Inc (NASDAQ:CME), and CVS Health Corporation (NYSE:CVS). This group of stocks’ market valuations are closest to BLK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LFC 8 45478 1
ANTM 66 4919379 -7
CME 39 1663130 -3
CVS 55 985752 -6
Average 42 1903435 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $1903 million. That figure was $676 million in BLK’s case. Anthem Inc (NYSE:ANTM) is the most popular stock in this table. On the other hand China Life Insurance Company Limited (NYSE:LFC) is the least popular one with only 8 bullish hedge fund positions. BlackRock, Inc. (NYSE:BLK) 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 BLK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BLK were disappointed as the stock returned -4.3% 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.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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