BlackRock, Inc. (BLK) vs. Hedge Fund Favorites in 2019
Amid an overall bull market, many stocks that smart money investors were collectively bullish on surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57%. Our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That's why we weren't surprised when hedge funds’ top 20 large-cap stock picks generated a return of 41.1% in 2019 (through December 23rd) and outperformed the broader market benchmark by 10.1 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is BlackRock, Inc. (NYSE:BLK) worth your attention right now? Money managers are selling. The number of bullish hedge fund bets went down by 1 recently. Our calculations also showed that BLK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings). BLK was in 42 hedge funds' portfolios at the end of the third quarter of 2019. There were 43 hedge funds in our database with BLK positions at the end of the previous quarter.
According to most stock holders, hedge funds are viewed as unimportant, old financial tools of the past. While there are over 8000 funds in operation at present, Our researchers choose to focus on the aristocrats of this club, approximately 750 funds. Most estimates calculate that this group of people command the lion's share of the smart money's total capital, and by monitoring their finest picks, Insider Monkey has revealed several investment strategies that have historically surpassed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_258236" align="alignnone" width="600"]
Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Now let's take a look at the latest hedge fund action regarding BlackRock, Inc. (NYSE:BLK).
Hedge fund activity in BlackRock, Inc. (NYSE:BLK)
At Q3's end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BLK over the last 17 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, Ken Griffin's Citadel Investment Group has the biggest position in BlackRock, Inc. (NYSE:BLK), worth close to $280.2 million, comprising 0.1% of its total 13F portfolio. On Citadel Investment Group's heels is Junto Capital Management, managed by James Parsons, which holds a $105.3 million position; the fund has 6.3% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism contain Tom Gayner's Markel Gayner Asset Management, Ken Fisher's Fisher Asset Management and Phill Gross and Robert Atchinson's Adage Capital Management. In terms of the portfolio weights assigned to each position Junto Capital Management allocated the biggest weight to BlackRock, Inc. (NYSE:BLK), around 6.26% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, earmarking 4.98 percent of its 13F equity portfolio to BLK.
Seeing as BlackRock, Inc. (NYSE:BLK) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of hedgies who sold off their positions entirely heading into Q4. At the top of the heap, Daniel Johnson's Gillson Capital said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, comprising close to $23.2 million in stock, and Andrew Sandler's Sandler Capital Management was right behind this move, as the fund cut about $12.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let's check out hedge fund activity in other stocks similar to BlackRock, Inc. (NYSE:BLK). We will take a look at Intuit Inc. (NASDAQ:INTU), Westpac Banking Corporation (NYSE:WBK), Becton, Dickinson and Company (NYSE:BDX), and The TJX Companies, Inc. (NYSE:TJX). This group of stocks' market valuations match BLK's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INTU,47,2011283,1 WBK,4,42624,1 BDX,44,1159555,4 TJX,48,1965386,-2 Average,35.75,1294712,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.75 hedge funds with bullish positions and the average amount invested in these stocks was $1295 million. That figure was $1041 million in BLK's case. The TJX Companies, Inc. (NYSE:TJX) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. BlackRock, Inc. (NYSE:BLK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on BLK, though not to the same extent, as the stock returned 31.1% during 2019 (as of 12/23) and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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