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Here’s What Hedge Funds Think About Booz Allen Hamilton Holding Corporation (BAH)

Nina Todic

We at Insider Monkey have gone over 738 13F filings that hedge funds and famous value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article we look at what those investors think of Booz Allen Hamilton Holding Corporation (NYSE:BAH).

Booz Allen Hamilton Holding Corporation (NYSE:BAH) was in 19 hedge funds' portfolios at the end of March. BAH has seen a decrease in activity from the world's largest hedge funds in recent months. There were 26 hedge funds in our database with BAH holdings at the end of the previous quarter. Our calculations also showed that bah isn't among the 30 most popular stocks among hedge funds.

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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Dmitry Balyasny

Let's take a peek at the new hedge fund action encompassing Booz Allen Hamilton Holding Corporation (NYSE:BAH).

What have hedge funds been doing with Booz Allen Hamilton Holding Corporation (NYSE:BAH)?

Heading into the second quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the fourth quarter of 2018. On the other hand, there were a total of 16 hedge funds with a bullish position in BAH a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with BAH Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, holds the biggest position in Booz Allen Hamilton Holding Corporation (NYSE:BAH). Polar Capital has a $81.9 million position in the stock, comprising 0.8% of its 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $54.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish comprise Dmitry Balyasny's Balyasny Asset Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Noam Gottesman's GLG Partners.

Seeing as Booz Allen Hamilton Holding Corporation (NYSE:BAH) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that decided to sell off their entire stakes in the third quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group sold off the biggest stake of all the hedgies watched by Insider Monkey, comprising about $9 million in stock, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital was right behind this move, as the fund said goodbye to about $3.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 7 funds in the third quarter.

Let's go over hedge fund activity in other stocks similar to Booz Allen Hamilton Holding Corporation (NYSE:BAH). We will take a look at West Pharmaceutical Services, I (NYSE:WST), Vereit Inc (NYSE:VER), Herbalife Nutrition Ltd. (NYSE:HLF), and SAGE Therapeutics Inc (NASDAQ:SAGE). All of these stocks' market caps are similar to BAH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WST,21,290123,1 VER,21,403492,3 HLF,32,3529120,3 SAGE,28,552183,-1 Average,25.5,1193730,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.5 hedge funds with bullish positions and the average amount invested in these stocks was $1194 million. That figure was $231 million in BAH's case. Herbalife Nutrition Ltd. (NYSE:HLF) is the most popular stock in this table. On the other hand West Pharmaceutical Services, I (NYSE:WST) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Booz Allen Hamilton Holding Corporation (NYSE:BAH) is even less popular than WST. Hedge funds clearly dropped the ball on BAH as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on BAH as the stock returned 7.9% during the same period and outperformed the market by an even larger margin.

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

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