The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Benefitfocus Inc (NASDAQ:BNFT) from the perspective of those successful funds.
Benefitfocus Inc (NASDAQ:BNFT) shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 7 hedge funds in our database with BNFT holdings at the end of the previous quarter. At the end of this article we will also compare BNFT to other stocks including Medpace Holdings Inc (NASDAQ:MEDP), Nextera Energy Partners LP (NYSE:NEP), and Schweitzer-Mauduit International, Inc. (NYSE:SWM) to get a better sense of its popularity.
Follow Benefitfocus Inc. (NASDAQ:BNFT)
Follow Benefitfocus Inc. (NASDAQ:BNFT)
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
Manczurov/Shutterstock.com
Now, let’s take a glance at the recent action encompassing Benefitfocus Inc (NASDAQ:BNFT).
How have hedgies been trading Benefitfocus Inc (NASDAQ:BNFT)?
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in BNFT over the last 5 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Thomas E. Claugus’s GMT Capital has the most valuable position in Benefitfocus Inc (NASDAQ:BNFT), worth close to $5.8 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $3.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions encompass Jim Simons’s Renaissance Technologies, Phil Frohlich’s Prescott Group Capital Management and Ken Griffin’s Citadel Investment Group. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, key money managers were breaking ground themselves. Renaissance Technologies, one of the largest hedge funds in the world, assembled the most valuable position in Benefitfocus Inc (NASDAQ:BNFT). Renaissance Technologies had $1.7 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new BNFT investors: Ken Griffin’s Citadel Investment Group, Matthew Hulsizer’s PEAK6 Capital Management, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Benefitfocus Inc (NASDAQ:BNFT) but similarly valued. We will take a look at Medpace Holdings Inc (NASDAQ:MEDP), Nextera Energy Partners LP (NYSE:NEP), Schweitzer-Mauduit International, Inc. (NYSE:SWM), and BMC Stock Holdings Inc (NASDAQ:BMCH). This group of stocks’ market values resemble BNFT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MEDP | 13 | 50825 | 13 |
| NEP | 19 | 129380 | 1 |
| SWM | 14 | 59504 | -3 |
| BMCH | 25 | 239738 | 5 |
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $120 million. That figure was $15 million in BNFT’s case. BMC Stock Holdings Inc (NASDAQ:BMCH) is the most popular stock in this table. On the other hand Medpace Holdings Inc (NASDAQ:MEDP) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Benefitfocus Inc (NASDAQ:BNFT) is even less popular than MEDP. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Suggested Articles:
Most Sold Items In Convenience Stores
Countries That Consume The Most Rice
Largest Beer Brewing Companies In The World
Disclosure: None
