Hedge Funds Are Selling Benchmark Electronics, Inc. (BHE)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Benchmark Electronics, Inc. (NYSE:BHE).

Is Benchmark Electronics, Inc. (NYSE:BHE) undervalued? The best stock pickers are getting less bullish. The number of long hedge fund bets fell by 5 recently. Our calculations also showed that BHE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). BHE was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. There were 19 hedge funds in our database with BHE holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Harding of Winton Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to review the new hedge fund action encompassing Benchmark Electronics, Inc. (NYSE:BHE).

How have hedgies been trading Benchmark Electronics, Inc. (NYSE:BHE)?

Heading into the second quarter of 2020, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the fourth quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in BHE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Benchmark Electronics, Inc. (NYSE:BHE), which was worth $9.6 million at the end of the third quarter. On the second spot was D E Shaw which amassed $4.9 million worth of shares. AQR Capital Management, Winton Capital Management, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Quantinno Capital allocated the biggest weight to Benchmark Electronics, Inc. (NYSE:BHE), around 0.28% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to BHE.

Judging by the fact that Benchmark Electronics, Inc. (NYSE:BHE) has experienced a decline in interest from hedge fund managers, we can see that there exists a select few funds who were dropping their positions entirely last quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, totaling about $3 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $2.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 5 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Benchmark Electronics, Inc. (NYSE:BHE) but similarly valued. These stocks are Upwork Inc. (NASDAQ:UPWK), German American Bancorp., Inc. (NASDAQ:GABC), Orchard Therapeutics plc (NASDAQ:ORTX), and Ingles Markets, Incorporated (NASDAQ:IMKTA). This group of stocks’ market caps match BHE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $25 million in BHE’s case. Upwork Inc. (NASDAQ:UPWK) is the most popular stock in this table. On the other hand German American Bancorp., Inc. (NASDAQ:GABC) is the least popular one with only 4 bullish hedge fund positions. Benchmark Electronics, Inc. (NYSE:BHE) is not the least popular stock in this group but hedge fund interest is still below average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and surpassed the market by 16.8 percentage points. Unfortunately BHE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BHE investors were disappointed as the stock returned 3.4% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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