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Hedge Funds Are Selling Bill.com Holdings, Inc. (BILL)

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At Insider Monkey, we pore over the filings of nearly 866 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 March 31st. In this article, we will use that wealth of knowledge to determine whether or not Bill.com Holdings, Inc. (NYSE:BILL) makes for a good investment right now.

Bill.com Holdings, Inc. (NYSE:BILL) was in 51 hedge funds' portfolios at the end of March. The all time high for this statistic is 52. BILL has experienced a decrease in hedge fund interest of late. There were 52 hedge funds in our database with BILL holdings at the end of December. Our calculations also showed that BILL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Alex Sacerdote of Whale Rock Capital Management

At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Keeping this in mind we're going to take a glance at the new hedge fund action surrounding Bill.com Holdings, Inc. (NYSE:BILL).

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

At the end of the first quarter, a total of 51 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in BILL a year ago. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, Whale Rock Capital Management was the largest shareholder of Bill.com Holdings, Inc. (NYSE:BILL), with a stake worth $568.2 million reported as of the end of March. Trailing Whale Rock Capital Management was Lone Pine Capital, which amassed a stake valued at $410.4 million. Abdiel Capital Advisors, Melvin Capital Management, and Tybourne Capital Management 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 3G Capital allocated the biggest weight to Bill.com Holdings, Inc. (NYSE:BILL), around 18.64% of its 13F portfolio. Andar Capital is also relatively very bullish on the stock, designating 12.12 percent of its 13F equity portfolio to BILL.

Because Bill.com Holdings, Inc. (NYSE:BILL) has faced falling interest from hedge fund managers, it's safe to say that there exists a select few hedgies who sold off their positions entirely heading into Q2. At the top of the heap, Aaron Cowen's Suvretta Capital Management cut the largest investment of the 750 funds tracked by Insider Monkey, worth an estimated $55.7 million in stock, and Adam Parker's Center Lake Capital was right behind this move, as the fund dropped about $9.9 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds heading into Q2.

Let's go over hedge fund activity in other stocks similar to Bill.com Holdings, Inc. (NYSE:BILL). We will take a look at Lincoln National Corporation (NYSE:LNC), RPM International Inc. (NYSE:RPM), Banco de Chile (NYSE:BCH), Sibanye Stillwater Limited (NYSE:SBSW), Host Hotels and Resorts Inc (NASDAQ:HST), Fidelity National Financial Inc (NYSE:FNF), and Tuya Inc. (NYSE:TUYA). This group of stocks' market caps are similar to BILL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LNC,36,715298,0 RPM,20,79868,-5 BCH,5,53333,2 SBSW,16,272595,-1 HST,25,240687,3 FNF,39,1164238,-1 TUYA,15,231919,15 Average,22.3,393991,1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.3 hedge funds with bullish positions and the average amount invested in these stocks was $394 million. That figure was $2411 million in BILL's case. Fidelity National Financial Inc (NYSE:FNF) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 5 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 83.4. 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. 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 17.4% in 2021 through June 18th but still managed to beat the market by 6.1 percentage points. Hedge funds were also right about betting on BILL as the stock returned 22.7% since the end of March (through 6/18) 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.