Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Bandwidth Inc. (NASDAQ:BAND) in this article.
Is Bandwidth Inc. (NASDAQ:BAND) the right pick for your portfolio? Money managers were selling. The number of bullish hedge fund positions were trimmed by 3 in recent months. Bandwidth Inc. (NASDAQ:BAND) was in 21 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 33. Our calculations also showed that BAND isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a glance at the new hedge fund action encompassing Bandwidth Inc. (NASDAQ:BAND).
Do Hedge Funds Think BAND Is A Good Stock To Buy Now?
At second quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards BAND over the last 24 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.
The largest stake in Bandwidth Inc. (NASDAQ:BAND) was held by Alta Park Capital, which reported holding $43.2 million worth of stock at the end of June. It was followed by Point72 Asset Management with a $39.2 million position. Other investors bullish on the company included Royce & Associates, Portolan Capital Management, and GLG Partners. In terms of the portfolio weights assigned to each position Alta Park Capital allocated the biggest weight to Bandwidth Inc. (NASDAQ:BAND), around 3.48% of its 13F portfolio. Provenire Capital is also relatively very bullish on the stock, setting aside 2.76 percent of its 13F equity portfolio to BAND.
Judging by the fact that Bandwidth Inc. (NASDAQ:BAND) has witnessed a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of hedge funds who were dropping their positions entirely by the end of the second quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the biggest position of all the hedgies watched by Insider Monkey, totaling about $6.6 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also cut its stock, about $3.3 million worth. These moves are interesting, as total hedge fund interest dropped by 3 funds by the end of the second quarter.
Let’s also examine hedge fund activity in other stocks similar to Bandwidth Inc. (NASDAQ:BAND). These stocks are Mimecast Limited (NASDAQ:MIME), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), Dana Incorporated (NYSE:DAN), Advantage Solutions Inc. (NASDAQ:ADV), SSR Mining Inc. (NASDAQ:SSRM), Tronox Holdings Plc (NYSE:TROX), and Cassava Sciences, Inc. (NASDAQ:SAVA). This group of stocks’ market valuations are similar to BAND’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MIME | 24 | 384912 | 0 |
| AMEH | 7 | 20969 | 0 |
| DAN | 24 | 548873 | -2 |
| ADV | 24 | 503984 | 0 |
| SSRM | 20 | 204712 | 4 |
| TROX | 36 | 353082 | 0 |
| SAVA | 13 | 52698 | 8 |
| Average | 21.1 | 295604 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $238 million in BAND’s case. Tronox Holdings Plc (NYSE:TROX) is the most popular stock in this table. On the other hand Apollo Medical Holdings, Inc. (NASDAQ:AMEH) is the least popular one with only 7 bullish hedge fund positions. Bandwidth Inc. (NASDAQ:BAND) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BAND is 45.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately BAND wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BAND investors were disappointed as the stock returned -36.4% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Bandwidth Inc. (NASDAQ:BAND)
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Disclosure: None. This article was originally published at Insider Monkey.
