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Hedge Funds Are Piling Into The Buckle, Inc. (BKE)

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At Insider Monkey, we pore over the filings of nearly 873 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of June 30th. In this article, we will use that wealth of knowledge to determine whether or not The Buckle, Inc. (NYSE:BKE) makes for a good investment right now.

Is The Buckle, Inc. (NYSE:BKE) undervalued? The best stock pickers were becoming hopeful. The number of bullish hedge fund positions inched up by 3 recently. The Buckle, Inc. (NYSE:BKE) was in 25 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BKE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 22 hedge funds in our database with BKE positions at the end of the first quarter.

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 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 79 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 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.

Wil Harkey Nantahala Capital
Wil Harkey Nantahala Capital

Wil Harkey of Nantahala 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 we're going to take a look at the fresh hedge fund action surrounding The Buckle, Inc. (NYSE:BKE).

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

At second quarter's end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BKE over the last 24 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

The largest stake in The Buckle, Inc. (NYSE:BKE) was held by Capital Growth Management, which reported holding $47.3 million worth of stock at the end of June. It was followed by Millennium Management with a $32 million position. Other investors bullish on the company included Arrowstreet Capital, Nantahala Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Capital Growth Management allocated the biggest weight to The Buckle, Inc. (NYSE:BKE), around 4.26% of its 13F portfolio. Six Columns Capital is also relatively very bullish on the stock, dishing out 1.83 percent of its 13F equity portfolio to BKE.

As aggregate interest increased, some big names have jumped into The Buckle, Inc. (NYSE:BKE) headfirst. Capital Growth Management, managed by Ken Heebner, established the most outsized position in The Buckle, Inc. (NYSE:BKE). Capital Growth Management had $47.3 million invested in the company at the end of the quarter. Wilmot B. Harkey and Daniel Mack's Nantahala Capital Management also initiated a $19.9 million position during the quarter. The other funds with brand new BKE positions are John Overdeck and David Siegel's Two Sigma Advisors, Brad Stephens's Six Columns Capital, and Charles Davidson and Joseph Jacobs's Wexford Capital.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as The Buckle, Inc. (NYSE:BKE) but similarly valued. We will take a look at Manchester United PLC (NYSE:MANU), Mueller Industries, Inc. (NYSE:MLI), Uniti Group Inc. (NASDAQ:UNIT), Health Catalyst, Inc (NASDAQ:HCAT), AeroVironment, Inc. (NASDAQ:AVAV), Magellan Health Inc (NASDAQ:MGLN), and Retail Properties of America Inc (NYSE:RPAI). This group of stocks' market caps match BKE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MANU,12,31402,-4 MLI,17,227384,-3 UNIT,16,295669,-1 HCAT,22,170687,2 AVAV,20,100604,4 MGLN,26,828067,2 RPAI,16,40374,7 Average,18.4,242027,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.4 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $197 million in BKE's case. Magellan Health Inc (NASDAQ:MGLN) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 12 bullish hedge fund positions. The Buckle, Inc. (NYSE:BKE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BKE is 84.4. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately BKE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BKE were disappointed as the stock returned -13.5% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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