We can judge whether Benchmark Electronics, Inc. (NYSE:BHE) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is Benchmark Electronics, Inc. (NYSE:BHE) a first-rate stock to buy now? Prominent investors are turning bullish. The number of bullish hedge fund bets went up by 7 lately. Our calculations also showed that BHE isn't among the 30 most popular stocks among hedge funds. BHE was in 19 hedge funds' portfolios at the end of the first quarter of 2019. There were 12 hedge funds in our database with BHE positions at the end of the previous quarter.
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' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let's view the latest hedge fund action surrounding Benchmark Electronics, Inc. (NYSE:BHE).
How are hedge funds trading Benchmark Electronics, Inc. (NYSE:BHE)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 58% from the fourth quarter of 2018. By comparison, 16 hedge funds held shares or bullish call options in BHE 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce's Royce & Associates has the biggest position in Benchmark Electronics, Inc. (NYSE:BHE), worth close to $21 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by D. E. Shaw of D E Shaw, with a $15.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism encompass Jim Simons's Renaissance Technologies, Glenn W. Welling's Engaged Capital and John Overdeck and David Siegel's Two Sigma Advisors.
As industrywide interest jumped, key hedge funds have jumped into Benchmark Electronics, Inc. (NYSE:BHE) headfirst. Weld Capital Management, managed by Minhua Zhang, created the biggest position in Benchmark Electronics, Inc. (NYSE:BHE). Weld Capital Management had $0.8 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser's Magnetar Capital also initiated a $0.6 million position during the quarter. The other funds with new positions in the stock are Mike Vranos's Ellington, Michael Platt and William Reeves's BlueCrest Capital Mgmt., and Joel Greenblatt's Gotham Asset Management.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Benchmark Electronics, Inc. (NYSE:BHE) but similarly valued. These stocks are Astronics Corporation (NASDAQ:ATRO), Piper Jaffray Companies (NYSE:PJC), Five Point Holdings, LLC (NYSE:FPH), and Cray Inc. (NASDAQ:CRAY). This group of stocks' market values are closest to BHE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATRO,13,104004,6 PJC,8,46296,3 FPH,16,273200,0 CRAY,19,71237,5 Average,14,123684,3.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $75 million in BHE's case. Cray Inc. (NASDAQ:CRAY) is the most popular stock in this table. On the other hand Piper Jaffray Companies (NYSE:PJC) is the least popular one with only 8 bullish hedge fund positions. Benchmark Electronics, Inc. (NYSE:BHE) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately BHE wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BHE were disappointed as the stock returned -13.6% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.