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Hedge Funds Are Selling BOK Financial Corporation (BOKF)

Nina Todic

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don't follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That's why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at BOK Financial Corporation (NASDAQ:BOKF) from the perspective of those elite funds.

BOK Financial Corporation (NASDAQ:BOKF) was in 16 hedge funds' portfolios at the end of the first quarter of 2019. BOKF has seen a decrease in hedge fund sentiment lately. There were 19 hedge funds in our database with BOKF holdings at the end of the previous quarter. Our calculations also showed that bokf isn't among the 30 most popular stocks among hedge funds.

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 market by 40 percentage points since May 2014 through May 30, 2019 (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.

Chuck Royce

We're going to take a look at the recent hedge fund action surrounding BOK Financial Corporation (NASDAQ:BOKF).

How have hedgies been trading BOK Financial Corporation (NASDAQ:BOKF)?

Heading into the second quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in BOKF a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with BOKF Positions

More specifically, Ariel Investments was the largest shareholder of BOK Financial Corporation (NASDAQ:BOKF), with a stake worth $73.6 million reported as of the end of March. Trailing Ariel Investments was Diamond Hill Capital, which amassed a stake valued at $50.3 million. Royce & Associates, Millennium Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that BOK Financial Corporation (NASDAQ:BOKF) has witnessed a decline in interest from hedge fund managers, it's easy to see that there were a few money managers that elected to cut their entire stakes last quarter. At the top of the heap, Clint Carlson's Carlson Capital dropped the biggest investment of all the hedgies tracked by Insider Monkey, worth about $5.8 million in stock, and Mark Lee's Forest Hill Capital was right behind this move, as the fund dumped about $5.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to BOK Financial Corporation (NASDAQ:BOKF). These stocks are Caesars Entertainment Corp (NASDAQ:CZR), Ciena Corporation (NYSE:CIEN), Monolithic Power Systems, Inc. (NASDAQ:MPWR), and Encompass Health Corporation (NYSE:EHC). This group of stocks' market caps are closest to BOKF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CZR,57,3150352,-1 CIEN,30,510894,1 MPWR,20,172987,-5 EHC,24,464510,-6 Average,32.75,1074686,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $1075 million. That figure was $216 million in BOKF's case. Caesars Entertainment Corp (NASDAQ:CZR) is the most popular stock in this table. On the other hand Monolithic Power Systems, Inc. (NASDAQ:MPWR) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks BOK Financial Corporation (NASDAQ:BOKF) is even less popular than MPWR. Hedge funds dodged a bullet by taking a bearish stance towards BOKF. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BOKF wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); BOKF investors were disappointed as the stock returned -7.2% during the same time frame and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in the second quarter.

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

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