Is BlackLine, Inc. (NASDAQ:BL) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Is BlackLine, Inc. (NASDAQ:BL) ready to rally soon? The best stock pickers are becoming less confident. The number of bullish hedge fund positions shrunk by 2 in recent months. Our calculations also showed that BL isn’t among the 30 most popular stocks among hedge funds. BL was in 13 hedge funds’ portfolios at the end of September. There were 15 hedge funds in our database with BL positions at the end of the previous quarter.
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 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s view the latest hedge fund action regarding BlackLine, Inc. (NASDAQ:BL).
Hedge fund activity in BlackLine, Inc. (NASDAQ:BL)
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BL over the last 13 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Silver Lake Partners, managed by Jim Davidson,áDave RouxáandáGlenn Hutchins, holds the largest position in BlackLine, Inc. (NASDAQ:BL). Silver Lake Partners has a $225 million position in the stock, comprising 7% of its 13F portfolio. The second largest stake is held by D. E. Shaw of D E Shaw, with a $11 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions comprise Simon Sadler’s Segantii Capital, Jim Simons’s Renaissance Technologies and John Overdeck and David Siegel’s Two Sigma Advisors.
Seeing as BlackLine, Inc. (NASDAQ:BL) has faced a decline in interest from the smart money, it’s easy to see that there was a specific group of money managers who were dropping their positions entirely last quarter. Interestingly, Panayotis Takis Sparaggis’s Alkeon Capital Management dumped the largest stake of the 700 funds followed by Insider Monkey, totaling about $30.4 million in stock. Robert G. Moses’s fund, RGM Capital, also dumped its stock, about $22.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to BlackLine, Inc. (NASDAQ:BL). We will take a look at CONSOL Energy Inc. (NYSE:CNX), SiteOne Landscape Supply, Inc. (NYSE:SITE), Altera Corporation (NASDAQ:ALTR), and Penn National Gaming, Inc (NASDAQ:PENN). This group of stocks’ market valuations are closest to BL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNX | 23 | 950530 | 0 |
| SITE | 15 | 108915 | 4 |
| ALTR | 13 | 117362 | -4 |
| PENN | 24 | 405398 | -3 |
| Average | 18.75 | 395551 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $396 million. That figure was $275 million in BL’s case. Penn National Gaming, Inc (NASDAQ:PENN) is the most popular stock in this table. On the other hand Altera Corporation (NASDAQ:ALTR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks BlackLine, Inc. (NASDAQ:BL) is even less popular than ALTR. 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.
Disclosure: None. This article was originally published at Insider Monkey.
