At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Benefitfocus Inc (NASDAQ:BNFT) makes for a good investment right now.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let's take a peek at the latest hedge fund action encompassing Benefitfocus Inc (NASDAQ:BNFT).
How have hedgies been trading Benefitfocus Inc (NASDAQ:BNFT)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BNFT over the last 13 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the number one position in Benefitfocus Inc (NASDAQ:BNFT). Millennium Management has a $33.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, which holds a $11.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers that are bullish comprise Steve Cohen's Point72 Asset Management, Chuck Royce's Royce & Associates and D. E. Shaw's D E Shaw.
As aggregate interest increased, some big names have been driving this bullishness. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, assembled the largest position in Benefitfocus Inc (NASDAQ:BNFT). Polar Capital had $11.5 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $6.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley's Holocene Advisors, Ken Griffin's Citadel Investment Group, and Matthew Hulsizer's PEAK6 Capital Management.
Let's now review hedge fund activity in other stocks similar to Benefitfocus Inc (NASDAQ:BNFT). We will take a look at Cryolife Inc (NYSE:CRY), Freshpet Inc (NASDAQ:FRPT), FTS International, Inc. (NYSE:FTSI), and GreenTree Hospitality Group Ltd. (NYSE:GHG). All of these stocks' market caps are similar to BNFT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRY,8,34596,-1 FRPT,13,39227,-2 FTSI,21,128202,3 GHG,11,25968,0 Average,13.25,56998,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $57 million. That figure was $69 million in BNFT's case. FTS International, Inc. (NYSE:FTSI) is the most popular stock in this table. On the other hand Cryolife Inc (NYSE:CRY) is the least popular one with only 8 bullish hedge fund positions. Benefitfocus Inc (NASDAQ:BNFT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard FTSI might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.