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Were Hedge Funds Right About Benchmark Electronics, Inc. (BHE)?

Reymerlyn Martin

Hedge funds don't get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don't realize is that 100% of the passive funds didn't see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Benchmark Electronics, Inc. (NYSE:BHE).

Benchmark Electronics, Inc. (NYSE:BHE) has seen an increase in enthusiasm from smart money lately. BHE was in 19 hedge funds' portfolios at the end of December. There were 15 hedge funds in our database with BHE holdings at the end of the previous quarter. Our calculations also showed that BHE isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

[caption id="attachment_746893" align="aligncenter" width="400"] Paul Marshall of Marshall Wace[/caption]

Paul Marshall Marshall Wace

We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the "next Amazon" in this video; again we are listening. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to check out the fresh hedge fund action surrounding Benchmark Electronics, Inc. (NYSE:BHE).

What does smart money think about Benchmark Electronics, Inc. (NYSE:BHE)?

At Q4's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BHE over the last 18 quarters. With the smart money's capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

The largest stake in Benchmark Electronics, Inc. (NYSE:BHE) was held by Renaissance Technologies, which reported holding $20.8 million worth of stock at the end of September. It was followed by AQR Capital Management with a $6.9 million position. Other investors bullish on the company included D E Shaw, Marshall Wace LLP, and Millennium Management. In terms of the portfolio weights assigned to each position Sciencast Management allocated the biggest weight to Benchmark Electronics, Inc. (NYSE:BHE), around 0.09% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to BHE.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, assembled the most outsized position in Benchmark Electronics, Inc. (NYSE:BHE). Winton Capital Management had $2.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $2.6 million position during the quarter. The other funds with brand new BHE positions are Dmitry Balyasny's Balyasny Asset Management, Qing Li's Sciencast Management, and Noam Gottesman's GLG Partners.

Let's check out hedge fund activity in other stocks similar to Benchmark Electronics, Inc. (NYSE:BHE). We will take a look at Triumph Group Inc (NYSE:TGI), Revolve Group, Inc. (NYSE:RVLV), Continental Building Products Inc (NYSE:CBPX), and Coherus Biosciences Inc (NASDAQ:CHRS). This group of stocks' market caps resemble BHE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TGI,16,90783,2 RVLV,11,36551,-5 CBPX,22,168360,3 CHRS,32,235119,9 Average,20.25,132703,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $53 million in BHE's case. Coherus Biosciences Inc (NASDAQ:CHRS) is the most popular stock in this table. On the other hand Revolve Group, Inc. (NYSE:RVLV) is the least popular one with only 11 bullish hedge fund positions. Benchmark Electronics, Inc. (NYSE:BHE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately BHE wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BHE investors were disappointed as the stock returned -41.8% 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 most of these stocks already outperformed the market in 2020. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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