We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 Black Hills Corporation (NYSE:BKH).
Black Hills Corporation (NYSE:BKH) shareholders have witnessed an increase in support from the world’s most elite money managers recently. Our calculations also showed that BKH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In today’s marketplace there are plenty of formulas shareholders have at their disposal to analyze stocks. A duo of the less utilized formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can beat the market by a solid margin (see the details here).
Mario Gabelli of GAMCO Investors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to go over the recent hedge fund action encompassing Black Hills Corporation (NYSE:BKH).
What have hedge funds been doing with Black Hills Corporation (NYSE:BKH)?
At the end of the fourth quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BKH over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Black Hills Corporation (NYSE:BKH), with a stake worth $111.1 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $22 million. GAMCO Investors, D E Shaw, and Shelter Harbor 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 Shelter Harbor Advisors allocated the biggest weight to Black Hills Corporation (NYSE:BKH), around 4.09% of its 13F portfolio. Blackstart Capital is also relatively very bullish on the stock, setting aside 1.41 percent of its 13F equity portfolio to BKH.
Consequently, key hedge funds were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the largest position in Black Hills Corporation (NYSE:BKH). Millennium Management had $5 million invested in the company at the end of the quarter. Brian Olson, Baehyun Sung, and Jamie Waters’s Blackstart Capital also made a $3.2 million investment in the stock during the quarter. The following funds were also among the new BKH investors: Michael Kharitonov and Jon David McAuliffe’s Voleon Capital, Brandon Haley’s Holocene Advisors, and Peter Muller’s PDT Partners.
Let’s also examine hedge fund activity in other stocks similar to Black Hills Corporation (NYSE:BKH). We will take a look at Carter’s, Inc. (NYSE:CRI), Repligen Corporation (NASDAQ:RGEN), Global Blood Therapeutics Inc (NASDAQ:GBT), and Clean Harbors Inc (NYSE:CLH). All of these stocks’ market caps are closest to BKH’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRI | 21 | 263204 | -4 |
| RGEN | 23 | 247507 | -3 |
| GBT | 23 | 793382 | -3 |
| CLH | 24 | 474390 | -4 |
| Average | 22.75 | 444621 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $445 million. That figure was $200 million in BKH’s case. Clean Harbors Inc (NYSE:CLH) is the most popular stock in this table. On the other hand Carter’s, Inc. (NYSE:CRI) is the least popular one with only 21 bullish hedge fund positions. Black Hills Corporation (NYSE:BKH) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately BKH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BKH were disappointed as the stock returned -25% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
