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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the second quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Blackbaud, Inc. (NASDAQ:BLKB) based on that data and determine whether they were really smart about the stock.
Blackbaud, Inc. (NASDAQ:BLKB) was in 19 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. BLKB shareholders have witnessed a decrease in support from the world's most elite money managers recently. There were 22 hedge funds in our database with BLKB holdings at the end of March. Our calculations also showed that BLKB isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we're going to review the fresh hedge fund action encompassing Blackbaud, Inc. (NASDAQ:BLKB).
How are hedge funds trading Blackbaud, Inc. (NASDAQ:BLKB)?
At second quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the first quarter of 2020. By comparison, 10 hedge funds held shares or bullish call options in BLKB a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Blackbaud, Inc. (NASDAQ:BLKB) was held by Echo Street Capital Management, which reported holding $25.7 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $13.8 million position. Other investors bullish on the company included Marshall Wace LLP, D E Shaw, and AQR Capital Management. In terms of the portfolio weights assigned to each position Greenhouse Funds allocated the biggest weight to Blackbaud, Inc. (NASDAQ:BLKB), around 0.97% of its 13F portfolio. Echo Street Capital Management is also relatively very bullish on the stock, setting aside 0.3 percent of its 13F equity portfolio to BLKB.
Since Blackbaud, Inc. (NASDAQ:BLKB) has faced declining sentiment from the aggregate hedge fund industry, it's easy to see that there is a sect of money managers that slashed their entire stakes by the end of the second quarter. Interestingly, Israel Englander's Millennium Management said goodbye to the largest position of the 750 funds tracked by Insider Monkey, worth about $6 million in stock, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors was right behind this move, as the fund dropped about $0.9 million worth. These moves are interesting, as total hedge fund interest was cut by 3 funds by the end of the second quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Blackbaud, Inc. (NASDAQ:BLKB) but similarly valued. We will take a look at ALLETE Inc (NYSE:ALE), AAON, Inc. (NASDAQ:AAON), Acacia Communications, Inc. (NASDAQ:ACIA), Cimarex Energy Co (NYSE:XEC), Navistar International Corp (NYSE:NAV), STAAR Surgical Company (NASDAQ:STAA), and Goosehead Insurance, Inc. (NASDAQ:GSHD). This group of stocks' market valuations are similar to BLKB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ALE,25,119344,7 AAON,15,26745,4 ACIA,34,959611,12 XEC,39,556800,4 NAV,33,1245849,-3 STAA,20,920886,-1 GSHD,15,114944,4 Average,25.9,563454,3.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $563 million. That figure was $96 million in BLKB's case. Cimarex Energy Co (NYSE:XEC) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 15 bullish hedge fund positions. Blackbaud, Inc. (NASDAQ:BLKB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BLKB is 36.2. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately BLKB wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BLKB investors were disappointed as the stock returned -2.2% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.