In this article we will take a look at whether hedge funds think Badger Meter, Inc. (NYSE:BMI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Badger Meter, Inc. (NYSE:BMI) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Hub Group Inc (NASDAQ:HUBG), Arvinas, Inc. (NASDAQ:ARVN), and NIC Inc. (NASDAQ:EGOV) to gather more data points. Our calculations also showed that BMI 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 the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_844243" align="aligncenter" width="400"] Donald Sussman of Paloma Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to go over the fresh hedge fund action encompassing Badger Meter, Inc. (NYSE:BMI).
How are hedge funds trading Badger Meter, Inc. (NYSE:BMI)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in BMI a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Impax Asset Management, managed by Ian Simm, holds the biggest position in Badger Meter, Inc. (NYSE:BMI). Impax Asset Management has a $84.1 million position in the stock, comprising 1.1% of its 13F portfolio. On Impax Asset Management's heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $9.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that are bullish include Mario Gabelli's GAMCO Investors, Chuck Royce's Royce & Associates and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Badger Meter, Inc. (NYSE:BMI), around 1.12% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, designating 0.1 percent of its 13F equity portfolio to BMI.
Since Badger Meter, Inc. (NYSE:BMI) has experienced declining sentiment from hedge fund managers, we can see that there is a sect of funds that slashed their entire stakes in the first quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP dumped the biggest stake of all the hedgies watched by Insider Monkey, comprising an estimated $18.3 million in stock. Michael Gelband's fund, ExodusPoint Capital, also sold off its stock, about $0.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Badger Meter, Inc. (NYSE:BMI) but similarly valued. These stocks are Hub Group Inc (NASDAQ:HUBG), Arvinas, Inc. (NASDAQ:ARVN), NIC Inc. (NASDAQ:EGOV), and 21Vianet Group Inc (NASDAQ:VNET). This group of stocks' market values match BMI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HUBG,17,190642,-2 ARVN,25,431346,-1 EGOV,17,105397,-5 VNET,15,129811,-1 Average,18.5,214299,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $214 million. That figure was $125 million in BMI's case. Arvinas, Inc. (NASDAQ:ARVN) is the most popular stock in this table. On the other hand 21Vianet Group Inc (NASDAQ:VNET) is the least popular one with only 15 bullish hedge fund positions. Badger Meter, Inc. (NYSE:BMI) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately BMI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BMI were disappointed as the stock returned 18.6% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.