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The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Badger Meter, Inc. (NYSE:BMI).
Is BMI a good stock to buy now? Badger Meter, Inc. (NYSE:BMI) has experienced a decrease in hedge fund sentiment of late. Badger Meter, Inc. (NYSE:BMI) was in 18 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 20. There were 20 hedge funds in our database with BMI positions at the end of the second quarter. Our calculations also showed that BMI 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Keeping this in mind we're going to check out the fresh hedge fund action surrounding Badger Meter, Inc. (NYSE:BMI).
Do Hedge Funds Think BMI Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BMI over the last 21 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Impax Asset Management was the largest shareholder of Badger Meter, Inc. (NYSE:BMI), with a stake worth $127.5 million reported as of the end of September. Trailing Impax Asset Management was GAMCO Investors, which amassed a stake valued at $9.3 million. Arrowstreet Capital, Royce & Associates, and Renaissance Technologies 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 Impax Asset Management allocated the biggest weight to Badger Meter, Inc. (NYSE:BMI), around 1.12% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.19 percent of its 13F equity portfolio to BMI.
Because Badger Meter, Inc. (NYSE:BMI) has experienced declining sentiment from the aggregate hedge fund industry, it's easy to see that there exists a select few hedgies who sold off their full holdings last quarter. Interestingly, Paul Tudor Jones's Tudor Investment Corp dropped the biggest investment of the 750 funds watched by Insider Monkey, totaling about $1.4 million in stock. Lee Ainslie's fund, Maverick Capital, also dumped its stock, about $0.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Badger Meter, Inc. (NYSE:BMI) but similarly valued. We will take a look at Chimera Investment Corporation (NYSE:CIM), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Prospect Capital Corporation (NASDAQ:PSEC), Pacific Biosciences of California (NASDAQ:PACB), CommVault Systems, Inc. (NASDAQ:CVLT), Bed Bath & Beyond Inc. (NASDAQ:BBBY), and Summit Materials Inc (NYSE:SUM). This group of stocks' market valuations are closest to BMI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CIM,20,80525,3 PPBI,8,62494,-3 PSEC,7,13771,0 PACB,25,380591,3 CVLT,24,426431,2 BBBY,32,498555,-1 SUM,31,198477,8 Average,21,237263,1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $165 million in BMI's case. Bed Bath & Beyond Inc. (NASDAQ:BBBY) is the most popular stock in this table. On the other hand Prospect Capital Corporation (NASDAQ:PSEC) is the least popular one with only 7 bullish hedge fund positions. Badger Meter, Inc. (NYSE:BMI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BMI is 52. 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. A small number of hedge funds were also right about betting on BMI as the stock returned 34.6% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.