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Hedge Funds Are Souring On Biglari Holdings Inc (BH)

Asma UL Husna

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Biglari Holdings Inc (NYSE:BH) and determine whether the smart money was really smart about this stock.

Biglari Holdings Inc (NYSE:BH) was in 10 hedge funds' portfolios at the end of the first quarter of 2020. BH investors should be aware of a decrease in activity from the world's largest hedge funds in recent months. There were 11 hedge funds in our database with BH holdings at the end of the previous quarter. Our calculations also showed that BH isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

In today’s marketplace there are several signals stock traders can use to size up their stock investments. A pair of the less known signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the market by a very impressive amount (see the details here).

[caption id="attachment_364871" align="aligncenter" width="392"] Jay Petschek of Corsair Capital Management[/caption]

Jay Petschek - Corsair Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a glance at the new hedge fund action regarding Biglari Holdings Inc (NYSE:BH).

What have hedge funds been doing with Biglari Holdings Inc (NYSE:BH)?

At Q1's end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BH over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, GAMCO Investors held the most valuable stake in Biglari Holdings Inc (NYSE:BH), which was worth $5.6 million at the end of the third quarter. On the second spot was Fondren Management which amassed $4.1 million worth of shares. GAMCO Investors, AQR Capital Management, and Corsair 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 Fondren Management allocated the biggest weight to Biglari Holdings Inc (NYSE:BH), around 10.36% of its 13F portfolio. Fondren Management is also relatively very bullish on the stock, dishing out 1.23 percent of its 13F equity portfolio to BH.

Because Biglari Holdings Inc (NYSE:BH) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of fund managers that slashed their positions entirely in the first quarter. At the top of the heap, Ken Griffin's Citadel Investment Group sold off the largest stake of the 750 funds watched by Insider Monkey, comprising close to $0.8 million in stock, and D. E. Shaw's D E Shaw was right behind this move, as the fund dropped about $0.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the first quarter.

Let's now take a look at 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 Quantum Corporation (NASDAQ:QMCO), CVR Partners LP (NYSE:UAN), The Container Store Group, Inc. (NYSE:TCS), and New Age Beverages Corporation (NASDAQ:NBEV). This group of stocks' market caps match BH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QMCO,10,6267,10 UAN,3,11447,0 TCS,8,4698,-5 NBEV,4,710,-1 Average,6.25,5781,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $6 million. That figure was $17 million in BH's case. Quantum Corporation (NASDAQ:QMCO) is the most popular stock in this table. On the other hand CVR Partners LP (NYSE:UAN) is the least popular one with only 3 bullish hedge fund positions. Biglari Holdings Inc (NYSE:BH) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on BH as the stock returned 34.2% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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