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Is BKH A Good Stock To Buy According To Hedge Funds?

Asma UL Husna
·6 min read

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Black Hills Corporation (NYSE:BKH).

Is BKH a good stock to buy now? Hedge fund interest in Black Hills Corporation (NYSE:BKH) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BKH 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). At the end of this article we will also compare BKH to other stocks including Inari Medical, Inc. (NASDAQ:NARI), Air Lease Corp (NYSE:AL), and Vicor Corp (NASDAQ:VICR) to get a better sense of its popularity. Video: Watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are a large number of methods shareholders put to use to evaluate stocks. A couple of the most under-the-radar methods are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can beat the S&P 500 by a significant amount (see the details here).

Mario Gabelli of GAMCO Investors

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 we're going to take a look at the latest hedge fund action encompassing Black Hills Corporation (NYSE:BKH).

Do Hedge Funds Think BKH Is A Good Stock To Buy Now?

At the end of September, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in BKH 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.

Among these funds, Renaissance Technologies held the most valuable stake in Black Hills Corporation (NYSE:BKH), which was worth $49.1 million at the end of the third quarter. On the second spot was Millennium Management which amassed $20.4 million worth of shares. D E Shaw, GAMCO Investors, and Citadel Investment Group 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 Huber Capital Management allocated the biggest weight to Black Hills Corporation (NYSE:BKH), around 0.99% of its 13F portfolio. Newtyn Management is also relatively very bullish on the stock, designating 0.97 percent of its 13F equity portfolio to BKH.

Due to the fact that Black Hills Corporation (NYSE:BKH) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of fund managers that elected to cut their entire stakes by the end of the third quarter. It's worth mentioning that Greg Eisner's Engineers Gate Manager said goodbye to the largest position of the 750 funds followed by Insider Monkey, comprising an estimated $0.5 million in stock, and Thomas Bailard's Bailard Inc was right behind this move, as the fund dropped about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks similar to Black Hills Corporation (NYSE:BKH). We will take a look at Inari Medical, Inc. (NASDAQ:NARI), Air Lease Corp (NYSE:AL), Vicor Corp (NASDAQ:VICR), ASGN Incorporated (NYSE:ASGN), Western Midstream Partners, LP (NYSE:WES), frontdoor, inc. (NASDAQ:FTDR), and Scientific Games Corp (NASDAQ:SGMS). This group of stocks' market valuations resemble BKH's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NARI,14,105958,-5 AL,20,608764,-2 VICR,20,75016,1 ASGN,21,73967,8 WES,10,65743,-1 FTDR,38,694601,-3 SGMS,25,990729,1 Average,21.1,373540,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $374 million. That figure was $129 million in BKH's case. frontdoor, inc. (NASDAQ:FTDR) is the most popular stock in this table. On the other hand Western Midstream Partners, LP (NYSE:WES) is the least popular one with only 10 bullish hedge fund positions. Black Hills Corporation (NYSE:BKH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BKH is 53.9. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on BKH as the stock returned 11.2% since the end of Q3 (through 12/14) 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.

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