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Is Booz Allen Hamilton Holding Corporation (BAH) Going to Burn These Hedge Funds?

Asma UL Husna
·6 mins read

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Booz Allen Hamilton Holding Corporation (NYSE:BAH) and determine whether the smart money was really smart about this stock.

Booz Allen Hamilton Holding Corporation (NYSE:BAH) was in 25 hedge funds' portfolios at the end of June. The all time high for this statistics is 35. BAH shareholders have witnessed a decrease in support from the world's most elite money managers in recent months. There were 27 hedge funds in our database with BAH positions at the end of the first quarter. Our calculations also showed that BAH 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.

Bruce Kovner, Caxton Associates LP
Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. Keeping this in mind we're going to go over the new hedge fund action regarding Booz Allen Hamilton Holding Corporation (NYSE:BAH).

How are hedge funds trading Booz Allen Hamilton Holding Corporation (NYSE:BAH)?

At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BAH over the last 20 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Booz Allen Hamilton Holding Corporation (NYSE:BAH) was held by AQR Capital Management, which reported holding $74 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $52.9 million position. Other investors bullish on the company included Two Sigma Advisors, GLG Partners, and PDT Partners. 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 4% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.45 percent of its 13F equity portfolio to BAH.

Since Booz Allen Hamilton Holding Corporation (NYSE:BAH) has witnessed falling interest from the entirety of the hedge funds we track, it's safe to say that there was a specific group of hedge funds that slashed their full holdings by the end of the second quarter. Interestingly, Phill Gross and Robert Atchinson's Adage Capital Management sold off the biggest investment of the 750 funds followed by Insider Monkey, worth close to $13.3 million in stock, and Brian Ashford-Russell and Tim Woolley's Polar Capital was right behind this move, as the fund dropped about $6.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds by the end of the second quarter.

Let's also examine hedge fund activity in other stocks similar to Booz Allen Hamilton Holding Corporation (NYSE:BAH). We will take a look at Cable One Inc (NYSE:CABO), Regions Financial Corporation (NYSE:RF), Credicorp Ltd. (NYSE:BAP), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Monolithic Power Systems, Inc. (NASDAQ:MPWR), argenx SE (NASDAQ:ARGX), and Molina Healthcare, Inc. (NYSE:MOH). All of these stocks' market caps are closest to BAH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CABO,24,684886,1 RF,26,191710,-11 BAP,20,174521,-2 CHRW,28,441588,-4 MPWR,36,555595,13 ARGX,29,1157644,4 MOH,34,1316051,2 Average,28.1,645999,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $646 million. That figure was $219 million in BAH's case. Monolithic Power Systems, Inc. (NASDAQ:MPWR) is the most popular stock in this table. On the other hand Credicorp Ltd. (NYSE:BAP) is the least popular one with only 20 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 40.1. 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 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. A small number of hedge funds were also right about betting on BAH as the stock returned 9.5% since the end of June (through September 25th) and outperformed the market by an even larger margin.

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

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