The latest 13F reporting period has come and gone, and 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. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought BlackLine, Inc. (NASDAQ:BL) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
BlackLine, Inc. (NASDAQ:BL) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds' portfolios at the end of June. Our calculations also showed that BL 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), Cullen/Frost Bankers, Inc. (NYSE:CFR), and Leggett & Platt, Inc. (NYSE:LEG) to gather more data points. Our calculations also showed that BL 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. 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. Now we're going to take a glance at the key hedge fund action regarding BlackLine, Inc. (NASDAQ:BL).
Hedge fund activity in BlackLine, Inc. (NASDAQ:BL)
At the end of June, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in BL a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of BlackLine, Inc. (NASDAQ:BL), with a stake worth $126.5 million reported as of the end of September. Trailing D E Shaw was Toronado Partners, which amassed a stake valued at $41.3 million. Two Sigma Advisors, Polar Capital, and Arrowstreet Capital 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 Toronado Partners allocated the biggest weight to BlackLine, Inc. (NASDAQ:BL), around 10.77% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.42 percent of its 13F equity portfolio to BL.
Judging by the fact that BlackLine, Inc. (NASDAQ:BL) has faced falling interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds who were dropping their full holdings heading into Q3. Intriguingly, Barry Lebovits and Joshua Kuntz's Rivulet Capital sold off the largest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $6.4 million in stock, and Derek C. Schrier's Indaba Capital Management was right behind this move, as the fund said goodbye to about $6 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as BlackLine, Inc. (NASDAQ:BL) but similarly valued. These stocks are Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), Cullen/Frost Bankers, Inc. (NYSE:CFR), Leggett & Platt, Inc. (NYSE:LEG), Globus Medical Inc (NYSE:GMED), Eastgroup Properties Inc (NYSE:EGP), Texas Pacific Land Trust (NYSE:TPL), and Pure Storage, Inc. (NYSE:PSTG). This group of stocks' market caps resemble BL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RARE,24,352560,6 CFR,13,21532,-5 LEG,29,184075,4 GMED,32,132005,13 EGP,14,46516,1 TPL,14,1048637,0 PSTG,29,354129,4 Average,22.1,305636,3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.1 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $227 million in BL's case. Globus Medical Inc (NYSE:GMED) is the most popular stock in this table. On the other hand Cullen/Frost Bankers, Inc. (NYSE:CFR) is the least popular one with only 13 bullish hedge fund positions. BlackLine, Inc. (NASDAQ:BL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BL is 45.2. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately BL wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BL investors were disappointed as the stock returned 8.1% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.