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Is Booz Allen Hamilton Holding Corporation (NYSE:BAH) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is BAH stock a buy? Booz Allen Hamilton Holding Corporation (NYSE:BAH) was in 27 hedge funds' portfolios at the end of December. The all time high for this statistic is 35. BAH investors should pay attention to a decrease in hedge fund sentiment in recent months. There were 31 hedge funds in our database with BAH holdings at the end of September. Our calculations also showed that BAH isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Alec Litowitz of Magnetar Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 website. With all of this in mind we're going to take a glance at the key hedge fund action encompassing Booz Allen Hamilton Holding Corporation (NYSE:BAH).
Do Hedge Funds Think BAH Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the third quarter of 2020. By comparison, 34 hedge funds held shares or bullish call options in BAH a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Booz Allen Hamilton Holding Corporation (NYSE:BAH) was held by Citadel Investment Group, which reported holding $76.4 million worth of stock at the end of December. It was followed by Holocene Advisors with a $47.3 million position. Other investors bullish on the company included AQR Capital Management, Renaissance Technologies, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Socorro Asset Management allocated the biggest weight to Booz Allen Hamilton Holding Corporation (NYSE:BAH), around 2.64% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, earmarking 2.02 percent of its 13F equity portfolio to BAH.
Since Booz Allen Hamilton Holding Corporation (NYSE:BAH) has faced a decline in interest from hedge fund managers, it's safe to say that there were a few hedge funds who sold off their full holdings in the fourth quarter. It's worth mentioning that Steve Cohen's Point72 Asset Management dumped the biggest position of all the hedgies monitored by Insider Monkey, worth about $7.5 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund dropped about $5.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 4 funds in the fourth quarter.
Let's go over hedge fund activity in other stocks similar to Booz Allen Hamilton Holding Corporation (NYSE:BAH). These stocks are PPD, Inc. (NASDAQ:PPD), IPG Photonics Corporation (NASDAQ:IPGP), Sibanye Stillwater Limited (NYSE:SBSW), Fortune Brands Home & Security Inc (NYSE:FBHS), InterContinental Hotels Group PLC (NYSE:IHG), Autohome Inc (NYSE:ATHM), and Brookfield Renewable Partners L.P. (NYSE:BEP). All of these stocks' market caps resemble BAH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PPD,29,703701,-4 IPGP,25,522346,1 SBSW,17,277735,-5 FBHS,30,343273,-3 IHG,7,20273,0 ATHM,16,714430,-1 BEP,20,277635,3 Average,20.6,408485,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $408 million. That figure was $305 million in BAH's case. Fortune Brands Home & Security Inc (NYSE:FBHS) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 7 bullish hedge fund positions. Booz Allen Hamilton Holding Corporation (NYSE:BAH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BAH is 67.6. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately BAH wasn't nearly as popular as these 30 stocks and hedge funds that were betting on BAH were disappointed as the stock returned -2.3% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.