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Hedge Funds Are Extremely Bullish On Bill.com Holdings, Inc. (BILL)

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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Bill.com Holdings, Inc. (NYSE:BILL).

Is Bill.com Holdings, Inc. (NYSE:BILL) a good investment right now? Money managers were getting more optimistic. The number of bullish hedge fund bets inched up by 2 recently. Bill.com Holdings, Inc. (NYSE:BILL) was in 53 hedge funds' portfolios at the end of June. The all time high for this statistic is 52. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BILL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 51 hedge funds in our database with BILL positions at the end of the first quarter.

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 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Gabriel Plotkin Melvin Capital Management
Gabriel Plotkin Melvin Capital Management

Gabriel Plotkin of Melvin Capital Management

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. With all of this in mind let's review the fresh hedge fund action surrounding Bill.com Holdings, Inc. (NYSE:BILL).

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

Heading into the third quarter of 2021, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BILL over the last 24 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Whale Rock Capital Management, managed by Alex Sacerdote, holds the most valuable position in Bill.com Holdings, Inc. (NYSE:BILL). Whale Rock Capital Management has a $666.3 million position in the stock, comprising 4.3% of its 13F portfolio. On Whale Rock Capital Management's heels is Abdiel Capital Advisors, managed by Colin Moran, which holds a $414.9 million position; 12% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish encompass Gabriel Plotkin's Melvin Capital Management, Zach Schreiber's Point State Capital and Eashwar Krishnan's Tybourne Capital Management. In terms of the portfolio weights assigned to each position 3G Capital allocated the biggest weight to Bill.com Holdings, Inc. (NYSE:BILL), around 16.8% of its 13F portfolio. Andar Capital is also relatively very bullish on the stock, earmarking 12.37 percent of its 13F equity portfolio to BILL.

With a general bullishness amongst the heavyweights, key hedge funds have jumped into Bill.com Holdings, Inc. (NYSE:BILL) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, assembled the most valuable call position in Bill.com Holdings, Inc. (NYSE:BILL). Melvin Capital Management had $73.3 million invested in the company at the end of the quarter. Louis Bacon's Moore Global Investments also made a $60.5 million investment in the stock during the quarter. The other funds with brand new BILL positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Adam Parker's Center Lake Capital, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.

Let's also examine hedge fund activity in other stocks similar to Bill.com Holdings, Inc. (NYSE:BILL). These stocks are CMS Energy Corporation (NYSE:CMS), Hologic, Inc. (NASDAQ:HOLX), Monolithic Power Systems, Inc. (NASDAQ:MPWR), Celanese Corporation (NYSE:CE), Diamondback Energy Inc (NASDAQ:FANG), United Airlines Holdings Inc (NASDAQ:UAL), and Rollins, Inc. (NYSE:ROL). This group of stocks' market valuations are closest to BILL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CMS,31,693813,3 HOLX,41,977376,9 MPWR,34,702043,2 CE,37,594932,1 FANG,38,443251,3 UAL,39,704030,1 ROL,30,610715,0 Average,35.7,675166,2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $675 million. That figure was $2767 million in BILL's case. Hologic, Inc. (NASDAQ:HOLX) is the most popular stock in this table. On the other hand Rollins, Inc. (NYSE:ROL) is the least popular one with only 30 bullish hedge fund positions. Compared to these stocks Bill.com Holdings, Inc. (NYSE:BILL) is more popular among hedge funds. Our overall hedge fund sentiment score for BILL is 87. 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 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 returned 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on BILL as the stock returned 51.3% since the end of June (through 10/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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