Where Do Hedge Funds Stand On Badger Meter, Inc. (BMI)?

Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Badger Meter, Inc. (NYSE:BMI).

Is Badger Meter, Inc. (NYSE:BMI) the right pick for your portfolio? The best stock pickers were in an optimistic mood. The number of long hedge fund positions improved by 1 lately. Badger Meter, Inc. (NYSE:BMI) was in 20 hedge funds’ portfolios at the end of March. The all time high for this statistic is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BMI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 19 hedge funds in our database with BMI holdings at the end of December.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. With all of this in mind let’s take a gander at the key hedge fund action surrounding Badger Meter, Inc. (NYSE:BMI).

Do Hedge Funds Think BMI Is A Good Stock To Buy Now?

At the end of March, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. By comparison, 20 hedge funds held shares or bullish call options in BMI 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.

According to Insider Monkey’s hedge fund database, Ian Simm’s Impax Asset Management has the number one position in Badger Meter, Inc. (NYSE:BMI), worth close to $96.2 million, comprising 0.5% of its total 13F portfolio. The second most bullish fund manager is Noam Gottesman of GLG Partners, with a $14.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions include Charles Montanaro’s Montanaro Asset Management, Mario Gabelli’s GAMCO Investors and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Montanaro Asset Management allocated the biggest weight to Badger Meter, Inc. (NYSE:BMI), around 2.13% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, designating 0.49 percent of its 13F equity portfolio to BMI.

With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Tudor Investment Corp, managed by Paul Tudor Jones, created the most outsized position in Badger Meter, Inc. (NYSE:BMI). Tudor Investment Corp had $3 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $1 million position during the quarter. The other funds with brand new BMI positions are Jinghua Yan’s TwinBeech Capital and Thomas Bailard’s Bailard Inc.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Badger Meter, Inc. (NYSE:BMI) but similarly valued. We will take a look at Maxar Technologies Inc (NYSE:MAXR), Coca-Cola Consolidated Inc. (NASDAQ:COKE), Comfort Systems USA, Inc. (NYSE:FIX), Laureate Education, Inc. (NASDAQ:LAUR), Albany International Corp. (NYSE:AIN), FirstCash, Inc. (NASDAQ:FCFS), and Sunstone Hotel Investors Inc (NYSE:SHO). This group of stocks’ market values match BMI’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAXR 22 367613 3
COKE 14 28996 2
FIX 19 87412 -1
LAUR 21 184412 -7
AIN 12 22018 -1
FCFS 13 100364 -4
SHO 17 121727 1
Average 16.9 130363 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $173 million in BMI’s case. Maxar Technologies Inc (NYSE:MAXR) is the most popular stock in this table. On the other hand Albany International Corp. (NYSE:AIN) is the least popular one with only 12 bullish hedge fund positions. Badger Meter, Inc. (NYSE:BMI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BMI is 76. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately BMI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BMI were disappointed as the stock returned 3.5% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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