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 Booz Allen Hamilton Holding Corporation (NYSE:BAH).
Is Booz Allen Hamilton Holding Corporation (NYSE:BAH) a buy right now? Prominent investors were taking a pessimistic view. The number of long hedge fund bets went down by 6 lately. Booz Allen Hamilton Holding Corporation (NYSE:BAH) was in 23 hedge funds’ portfolios at the end of September. The all time high for this statistic is 35. Our calculations also showed that BAH isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to check out the key hedge fund action regarding Booz Allen Hamilton Holding Corporation (NYSE:BAH).
Do Hedge Funds Think BAH Is A Good Stock To Buy Now?
At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. By comparison, 31 hedge funds held shares or bullish call options in BAH a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
The largest stake in Booz Allen Hamilton Holding Corporation (NYSE:BAH) was held by AQR Capital Management, which reported holding $50.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $39.9 million position. Other investors bullish on the company included Millennium Management, Point72 Asset Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Game Creek Capital allocated the biggest weight to Booz Allen Hamilton Holding Corporation (NYSE:BAH), around 2.7% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, dishing out 1.62 percent of its 13F equity portfolio to BAH.
Due to the fact that Booz Allen Hamilton Holding Corporation (NYSE:BAH) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of fund managers who were dropping their positions entirely by the end of the third quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, totaling an estimated $20.9 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund said goodbye to about $3.4 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 6 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Booz Allen Hamilton Holding Corporation (NYSE:BAH) but similarly valued. We will take a look at StoneCo Ltd. (NASDAQ:STNE), Builders FirstSource, Inc. (NASDAQ:BLDR), American Financial Group (NYSE:AFG), Henry Schein, Inc. (NASDAQ:HSIC), Dicks Sporting Goods Inc (NYSE:DKS), GDS Holdings Limited (NASDAQ:GDS), and Cemex SAB de CV (NYSE:CX). This group of stocks’ market valuations resemble BAH’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STNE | 37 | 2215793 | -7 |
| BLDR | 53 | 2213103 | -7 |
| AFG | 23 | 239662 | 4 |
| HSIC | 31 | 1483481 | -8 |
| DKS | 36 | 1615509 | 0 |
| GDS | 24 | 1018195 | -14 |
| CX | 19 | 438842 | -4 |
| Average | 31.9 | 1317798 | -5.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $1318 million. That figure was $199 million in BAH’s case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand Cemex SAB de CV (NYSE:CX) is the least popular one with only 19 bullish hedge fund positions. Booz Allen Hamilton Holding Corporation (NYSE:BAH) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BAH is 24.6. 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 31.1% in 2021 through December 9th and surpassed the market again by 5.1 percentage points. Unfortunately BAH wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); BAH investors were disappointed as the stock returned 5.7% since the end of September (through 12/9) 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 Booz Allen Hamilton Holding Corp (NYSE:BAH)
Follow Booz Allen Hamilton Holding Corp (NYSE:BAH)
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Disclosure: None. This article was originally published at Insider Monkey.
