We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Benefitfocus Inc (NASDAQ:BNFT).
Benefitfocus Inc (NASDAQ:BNFT) was in 14 hedge funds' portfolios at the end of the third quarter of 2019. BNFT investors should pay attention to a decrease in activity from the world's largest hedge funds of late. There were 15 hedge funds in our database with BNFT positions at the end of the previous quarter. Our calculations also showed that BNFT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are a multitude of gauges shareholders use to assess publicly traded companies. Some of the most under-the-radar gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outpace the broader indices by a healthy amount (see the details here).
[caption id="attachment_673876" align="alignnone" width="1613"] John Overdeck of Two Sigma Advisors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's view the recent hedge fund action encompassing Benefitfocus Inc (NASDAQ:BNFT).
How are hedge funds trading Benefitfocus Inc (NASDAQ:BNFT)?
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in BNFT a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Two Sigma Advisors was the largest shareholder of Benefitfocus Inc (NASDAQ:BNFT), with a stake worth $7.8 million reported as of the end of September. Trailing Two Sigma Advisors was Hudson Bay Capital Management, which amassed a stake valued at $5.8 million. Selz Capital, D E Shaw, and Boardman Bay Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Boardman Bay Capital Management allocated the biggest weight to Benefitfocus Inc (NASDAQ:BNFT), around 2.77% of its 13F portfolio. Selz Capital is also relatively very bullish on the stock, designating 1.24 percent of its 13F equity portfolio to BNFT.
Judging by the fact that Benefitfocus Inc (NASDAQ:BNFT) has faced bearish sentiment from hedge fund managers, logic holds that there exists a select few hedge funds that slashed their entire stakes last quarter. Interestingly, Brian Ashford-Russell and Tim Woolley's Polar Capital sold off the biggest position of all the hedgies watched by Insider Monkey, comprising about $9.1 million in stock. Renaissance Technologies, also dumped its stock, about $3.2 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Benefitfocus Inc (NASDAQ:BNFT) but similarly valued. These stocks are Twist Bioscience Corporation (NASDAQ:TWST), ArcBest Corp (NASDAQ:ARCB), Vocera Communications Inc (NYSE:VCRA), and Tupperware Brands Corporation (NYSE:TUP). This group of stocks' market caps resemble BNFT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TWST,10,67289,1 ARCB,14,75592,-2 VCRA,9,26901,-5 TUP,14,112420,-3 Average,11.75,70551,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $31 million in BNFT's case. ArcBest Corp (NASDAQ:ARCB) is the most popular stock in this table. On the other hand Vocera Communications Inc (NYSE:VCRA) is the least popular one with only 9 bullish hedge fund positions. Benefitfocus Inc (NASDAQ:BNFT) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BNFT wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BNFT were disappointed as the stock returned 0.7% during the fourth quarter (through the end of November) 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.