Black Knight, Inc. (BKI) Fell Out Of Favor With Hedge Funds

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on June 30th. We at Insider Monkey have made an extensive database of more than 873 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Black Knight, Inc. (NYSE:BKI) based on those filings.

Is Black Knight, Inc. (NYSE:BKI) a buy right now? Money managers were reducing their bets on the stock. The number of long hedge fund positions retreated by 7 recently. Black Knight, Inc. (NYSE:BKI) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistic is 45. Our calculations also showed that BKI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the 21st century investor’s toolkit there are many metrics investors put to use to value their stock investments. Two of the most innovative metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the best fund managers can outclass the broader indices by a solid margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Dan Loeb of Third Point

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. Now let’s go over the fresh hedge fund action encompassing Black Knight, Inc. (NYSE:BKI).

Do Hedge Funds Think BKI Is A Good Stock To Buy Now?

At second quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BKI over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, D. E. Shaw’s D E Shaw has the number one position in Black Knight, Inc. (NYSE:BKI), worth close to $176 million, comprising 0.2% of its total 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $149.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism consist of Greg Poole’s Echo Street Capital Management, Dan Loeb’s Third Point and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Aravt Global allocated the biggest weight to Black Knight, Inc. (NYSE:BKI), around 10.27% of its 13F portfolio. ROAM Global Management is also relatively very bullish on the stock, designating 8.62 percent of its 13F equity portfolio to BKI.

Seeing as Black Knight, Inc. (NYSE:BKI) has experienced falling interest from hedge fund managers, logic holds that there exists a select few funds that slashed their positions entirely last quarter. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors cut the biggest stake of the 750 funds watched by Insider Monkey, valued at about $43.2 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also dropped its stock, about $8.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 7 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Black Knight, Inc. (NYSE:BKI) but similarly valued. These stocks are Ozon Holdings PLC (NASDAQ:OZON), Dr. Reddy’s Laboratories Limited (NYSE:RDY), Jack Henry & Associates, Inc. (NASDAQ:JKHY), Tapestry, Inc. (NYSE:TPR), The Mosaic Company (NYSE:MOS), Companhia Siderurgica Nacional (NYSE:SID), and Snap-on Incorporated (NYSE:SNA). This group of stocks’ market valuations resemble BKI’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $438 million. That figure was $995 million in BKI’s case. The Mosaic Company (NYSE:MOS) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (NYSE:RDY) is the least popular one with only 11 bullish hedge fund positions. Black Knight, Inc. (NYSE:BKI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BKI is 54.4. 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 positive signal but 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately BKI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BKI were disappointed as the stock returned -8.8% since the end of June (through 10/15) 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 many of these stocks already outperformed the market since 2019.

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