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In this article you are going to find out whether hedge funds think Biglari Holdings Inc (NYSE:BH) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is BH a good stock to buy now? The smart money was in a bearish mood. The number of bullish hedge fund positions retreated by 3 in recent months. Biglari Holdings Inc (NYSE:BH) was in 9 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. Our calculations also showed that BH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 12 hedge funds in our database with BH positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Eric Singer of VIEX Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now let's take a gander at the recent hedge fund action surrounding Biglari Holdings Inc (NYSE:BH).
Do Hedge Funds Think BH Is A Good Stock To Buy Now?
At third quarter's end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the second quarter of 2020. On the other hand, there were a total of 11 hedge funds with a bullish position in BH 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 publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mario Gabelli's GAMCO Investors has the most valuable position in Biglari Holdings Inc (NYSE:BH), worth close to $10.4 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Fondren Management, led by Bradley Louis Radoff, holding a $3.9 million position; 23.2% of its 13F portfolio is allocated to the stock. Some other peers that are bullish contain Eric Singer's VIEX Capital Advisors, Cliff Asness's AQR Capital Management and Jay Petschek and Steven Major's Corsair Capital Management. In terms of the portfolio weights assigned to each position Fondren Management allocated the biggest weight to Biglari Holdings Inc (NYSE:BH), around 23.24% of its 13F portfolio. VIEX Capital Advisors is also relatively very bullish on the stock, designating 3.05 percent of its 13F equity portfolio to BH.
Judging by the fact that Biglari Holdings Inc (NYSE:BH) has experienced declining sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of funds that decided to sell off their full holdings by the end of the third quarter. It's worth mentioning that Bradley Louis Radoff's Fondren Management said goodbye to the largest stake of the 750 funds watched by Insider Monkey, totaling close to $0.5 million in stock. Renaissance Technologies, also dumped its stock, about $0.4 million worth. These moves are important to note, as total hedge fund interest fell by 3 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Biglari Holdings Inc (NYSE:BH). We will take a look at Heritage Insurance Holdings Inc (NYSE:HRTG), SunCoke Energy, Inc (NYSE:SXC), Digimarc Corp (NASDAQ:DMRC), Paysign, Inc. (NASDAQ:PAYS), TravelCenters of America Inc. (NASDAQ:TA), Microvision, Inc. (NASDAQ:MVIS), and Citizens, Inc. (NYSE:CIA). All of these stocks' market caps are closest to BH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HRTG,11,29862,-1 SXC,19,61420,0 DMRC,6,26173,-1 PAYS,5,9896,0 TA,12,62213,5 MVIS,2,237,0 CIA,2,2160,0 Average,8.1,27423,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.1 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $26 million in BH's case. SunCoke Energy, Inc (NYSE:SXC) is the most popular stock in this table. On the other hand Microvision, Inc. (NASDAQ:MVIS) is the least popular one with only 2 bullish hedge fund positions. Biglari Holdings Inc (NYSE:BH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BH is 45.1. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on BH as the stock returned 33.1% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.