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Booz Allen Hamilton Holding Corporation (BAH) vs. Top 20 Hedge Fund Stocks in 2019

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Booz Allen Hamilton Holding Corporation (NYSE:BAH).

Booz Allen Hamilton Holding Corporation (NYSE:BAH) has seen an increase in activity from the world's largest hedge funds lately. BAH was in 33 hedge funds' portfolios at the end of September. There were 31 hedge funds in our database with BAH positions at the end of the previous quarter. Our calculations also showed that BAH 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).

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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_30621" align="alignnone" width="600"] Cliff Asness of AQR Capital Management[/caption]

AQR CAPITAL MANAGEMENT

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. With all of this in mind let's take a look at the recent hedge fund action surrounding Booz Allen Hamilton Holding Corporation (NYSE:BAH).

Hedge fund activity in Booz Allen Hamilton Holding Corporation (NYSE:BAH)

Heading into the fourth quarter of 2019, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in BAH over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BAH A Good Stock To Buy?

Among these funds, AQR Capital Management held the most valuable stake in Booz Allen Hamilton Holding Corporation (NYSE:BAH), which was worth $93 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $67 million worth of shares. Polar Capital, Two Sigma Advisors, 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 Game Creek Capital allocated the biggest weight to Booz Allen Hamilton Holding Corporation (NYSE:BAH), around 2.67% of its 13F portfolio. Axel Capital Management is also relatively very bullish on the stock, dishing out 1.76 percent of its 13F equity portfolio to BAH.

As aggregate interest increased, specific money managers were leading the bulls' herd. Renaissance Technologies, established the most outsized position in Booz Allen Hamilton Holding Corporation (NYSE:BAH). Renaissance Technologies had $42.6 million invested in the company at the end of the quarter. Michael Gelband's ExodusPoint Capital also initiated a $17.6 million position during the quarter. The other funds with new positions in the stock are Peter Muller's PDT Partners, David E. Shaw's D E Shaw, and Brad Dunkley and Blair Levinsky's Waratah Capital Advisors.

Let's now take a look at hedge fund activity in other stocks similar to Booz Allen Hamilton Holding Corporation (NYSE:BAH). These stocks are Elanco Animal Health Incorporated (NYSE:ELAN), Bio-Rad Laboratories, Inc. (NYSE:BIO), Marathon Oil Corporation (NYSE:MRO), and Comerica Incorporated (NYSE:CMA). All of these stocks' market caps match BAH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ELAN,24,359109,-3 BIO,39,1091143,3 MRO,35,394969,3 CMA,28,468164,-4 Average,31.5,578346,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $578 million. That figure was $470 million in BAH's case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand Elanco Animal Health Incorporated (NYSE:ELAN) is the least popular one with only 24 bullish hedge fund positions. Booz Allen Hamilton Holding Corporation (NYSE:BAH) 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 BAH as the stock returned 61.1% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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