At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Bill.com Holdings, Inc. (NYSE:BILL).
Bill.com Holdings, Inc. (NYSE:BILL) investors should be aware of a decrease in hedge fund interest of late. Our calculations also showed that BILL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_221466" align="aligncenter" width="397"] Jorge Paulo Lemann of 3G Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we're going to view the latest hedge fund action regarding Bill.com Holdings, Inc. (NYSE:BILL).
What does smart money think about Bill.com Holdings, Inc. (NYSE:BILL)?
At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BILL over the last 18 quarters. With hedgies' capital changing hands, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Napier Park Global Capital, managed by Jim O'Brien and Jonathan Dorfman, holds the biggest position in Bill.com Holdings, Inc. (NYSE:BILL). Napier Park Global Capital has a $162.6 million position in the stock, comprising 73.9% of its 13F portfolio. Coming in second is Abdiel Capital Advisors, managed by Colin Moran, which holds a $87.1 million position; the fund has 4.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish consist of Alex Sacerdote's Whale Rock Capital Management, Greg Poole's Echo Street Capital Management and Richard Merage's MIG Capital. In terms of the portfolio weights assigned to each position Napier Park Global Capital allocated the biggest weight to Bill.com Holdings, Inc. (NYSE:BILL), around 73.85% of its 13F portfolio. 3G Capital is also relatively very bullish on the stock, designating 13.04 percent of its 13F equity portfolio to BILL.
Judging by the fact that Bill.com Holdings, Inc. (NYSE:BILL) has witnessed bearish sentiment from hedge fund managers, we can see that there is a sect of hedgies who were dropping their full holdings by the end of the first quarter. At the top of the heap, Ken Griffin's Citadel Investment Group said goodbye to the biggest position of the "upper crust" of funds tracked by Insider Monkey, comprising about $16.6 million in stock. Ryan Tolkin (CIO)'s fund, Schonfeld Strategic Advisors, also dropped its stock, about $11.8 million worth. These moves are important to note, as total hedge fund interest fell by 10 funds by the end of the first quarter.
Let's now take a look at hedge fund activity in other stocks similar to Bill.com Holdings, Inc. (NYSE:BILL). We will take a look at Semtech Corporation (NASDAQ:SMTC), EQM Midstream Partners LP (NYSE:EQM), The Timken Company (NYSE:TKR), and Shenandoah Telecommunications Company (NASDAQ:SHEN). This group of stocks' market caps are similar to BILL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SMTC,17,145584,5 EQM,6,15334,-5 TKR,30,262596,-10 SHEN,11,97332,1 Average,16,130212,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $385 million in BILL's case. The Timken Company (NYSE:TKR) is the most popular stock in this table. On the other hand EQM Midstream Partners LP (NYSE:EQM) is the least popular one with only 6 bullish hedge fund positions. Bill.com Holdings, Inc. (NYSE:BILL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on BILL as the stock returned 119.3% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.