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Do Hedge Funds Love Biglari Holdings Inc (BH)?

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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Biglari Holdings Inc (NYSE:BH) to find out whether there were any major changes in hedge funds' views.

Is Biglari Holdings Inc (NYSE:BH) a buy here? Prominent investors were cutting their exposure. The number of bullish hedge fund bets were cut by 3 in recent months. Biglari Holdings Inc (NYSE:BH) was in 6 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 12. Our calculations also showed that BH isn't among the 30 most popular stocks among hedge funds (click for Q1 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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Mario Gabelli of GAMCO Investors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund owns nearly 40% of this $24 biotech stock and is trying to buy the rest for around $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 we're going to go over the recent hedge fund action surrounding Biglari Holdings Inc (NYSE:BH).

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

Heading into the second quarter of 2021, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in BH over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the number one position in Biglari Holdings Inc (NYSE:BH). GAMCO Investors has a $12.5 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $2.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions include Mario Gabelli's GAMCO Investors, Israel Englander's Millennium Management and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Biglari Holdings Inc (NYSE:BH), around 0.11% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to BH.

Judging by the fact that Biglari Holdings Inc (NYSE:BH) has witnessed a decline in interest from hedge fund managers, logic holds that there was a specific group of hedge funds who were dropping their entire stakes heading into Q2. Interestingly, Jay Petschek and Steven Major's Corsair Capital Management sold off the biggest position of the "upper crust" of funds tracked by Insider Monkey, comprising an estimated $1 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds heading into Q2.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Biglari Holdings Inc (NYSE:BH) but similarly valued. We will take a look at WAVE Life Sciences Ltd. (NASDAQ:WVE), Diana Shipping Inc. (NYSE:DSX), Provident Bancorp, Inc. (NASDAQ:PVBC), SuRo Capital Corp. (NASDAQ:SSSS), Hywin Holdings Ltd. (NASDAQ:HYW), Great Panther Mining Ltd (NYSE:GPL), and Navios Maritime Partners L.P. (NYSE:NMM). This group of stocks' market values are closest to BH's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WVE,20,114407,-3 DSX,13,37706,4 PVBC,5,4867,-2 SSSS,12,31501,1 HYW,1,1960,1 GPL,7,7037,-1 NMM,4,6019,1 Average,8.9,29071,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $20 million in BH's case. WAVE Life Sciences Ltd. (NASDAQ:WVE) is the most popular stock in this table. On the other hand Hywin Holdings Ltd. (NASDAQ:HYW) is the least popular one with only 1 bullish hedge fund positions. Biglari Holdings Inc (NYSE:BH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BH is 30.2. 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 gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. A small number of hedge funds were also right about betting on BH as the stock returned 17.9% since the end of the first quarter (through 6/25) and outperformed the market by an even larger margin.

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