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Booz Allen Hamilton Holding Corporation (BAH) Fell Out Of Favor With Hedge Funds?

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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 second quarter, which unveil their equity positions as of June 30th. 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 Booz Allen Hamilton Holding Corporation (NYSE:BAH).

Hedge fund interest in Booz Allen Hamilton Holding Corporation (NYSE:BAH) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that BAH isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare BAH to other stocks including Bruker Corporation (NASDAQ:BRKR), RPM International Inc. (NYSE:RPM), and Axon Enterprise, Inc. (NASDAQ:AXON) to get a better sense of its popularity.

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 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Fred DiSanto Ancora Advisors
Fred DiSanto Ancora Advisors

Fred DiSanto of Ancora Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let's go over the recent hedge fund action encompassing Booz Allen Hamilton Holding Corporation (NYSE:BAH).

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

At the end of the second quarter, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in BAH a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Booz Allen Hamilton Holding Corporation (NYSE:BAH), which was worth $64.7 million at the end of the second quarter. On the second spot was Renaissance Technologies which amassed $35.7 million worth of shares. Arrowstreet Capital, Millennium Management, and Point72 Asset Management 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 Game Creek Capital allocated the biggest weight to Booz Allen Hamilton Holding Corporation (NYSE:BAH), around 2.65% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, setting aside 0.71 percent of its 13F equity portfolio to BAH.

Seeing as Booz Allen Hamilton Holding Corporation (NYSE:BAH) has experienced declining sentiment from the smart money, logic holds that there lies a certain "tier" of hedgies that decided to sell off their entire stakes in the second quarter. It's worth mentioning that Matthew Hulsizer's PEAK6 Capital Management dumped the largest stake of all the hedgies monitored by Insider Monkey, worth about $2.4 million in stock, and Greg Eisner's Engineers Gate Manager was right behind this move, as the fund dumped about $1.9 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's also examine hedge fund activity in other stocks similar to Booz Allen Hamilton Holding Corporation (NYSE:BAH). These stocks are Bruker Corporation (NASDAQ:BRKR), RPM International Inc. (NYSE:RPM), Axon Enterprise, Inc. (NASDAQ:AXON), Sunrun Inc (NASDAQ:RUN), SentinelOne, Inc. (NYSE:S), Pegasystems Inc. (NASDAQ:PEGA), and Cree, Inc. (NASDAQ:CREE). This group of stocks' market valuations match BAH's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BRKR,31,459507,9 RPM,22,91588,2 AXON,24,513588,-7 RUN,45,2517525,4 S,67,2062506,67 PEGA,27,2029409,-8 CREE,31,391130,1 Average,35.3,1152179,9.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.3 hedge funds with bullish positions and the average amount invested in these stocks was $1152 million. That figure was $215 million in BAH's case. SentinelOne, Inc. (NYSE:S) is the most popular stock in this table. On the other hand RPM International Inc. (NYSE:RPM) is the least popular one with only 22 bullish hedge fund positions. Booz Allen Hamilton Holding Corporation (NYSE:BAH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BAH is 37.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately BAH wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BAH investors were disappointed as the stock returned -4.5% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.