A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by nearly 7 percentage points during the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let's study the hedge fund sentiment to see how those concerns affected their ownership of Boston Omaha Corporation (NASDAQ:BOMN) during the quarter.
Boston Omaha Corporation (NASDAQ:BOMN) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds' portfolios at the end of the fourth quarter of 2018. At the end of this article we will also compare BOMN to other stocks including Global Indemnity plc (NASDAQ:GBLI), Ribbon Communications Inc. (NASDAQ:RBBN), and Universal Logistics Holdings, Inc. (NASDAQ:ULH) to get a better sense of its popularity.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.
Let's check out the fresh hedge fund action regarding Boston Omaha Corporation (NASDAQ:BOMN).
How have hedgies been trading Boston Omaha Corporation (NASDAQ:BOMN)?
At Q4's end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards BOMN over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Adam Peterson's Magnolia Capital Fund has the most valuable position in Boston Omaha Corporation (NASDAQ:BOMN), worth close to $160.4 million, accounting for 25.2% of its total 13F portfolio. On Magnolia Capital Fund's heels is Charles Akre of Akre Capital Management, with a $5.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions include Louis Bacon's Moore Global Investments and Murray Stahl's Horizon Asset Management.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks similar to Boston Omaha Corporation (NASDAQ:BOMN). We will take a look at Global Indemnity plc (NASDAQ:GBLI), Ribbon Communications Inc. (NASDAQ:RBBN), Universal Logistics Holdings, Inc. (NASDAQ:ULH), and Casa Therapeutics Inc (NASDAQ:CARA). All of these stocks' market caps are closest to BOMN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GBLI,5,43521,-2 RBBN,15,31278,4 ULH,11,23418,-1 CARA,9,17112,-2 Average,10,28832,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $168 million in BOMN's case. Ribbon Communications Inc. (NASDAQ:RBBN) is the most popular stock in this table. On the other hand Global Indemnity plc (NASDAQ:GBLI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Boston Omaha Corporation (NASDAQ:BOMN) is even less popular than GBLI. Hedge funds dodged a bullet by taking a bearish stance towards BOMN. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately BOMN wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); BOMN investors were disappointed as the stock returned 6.6% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.