Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That’s why we pay special attention to hedge fund activity in these stocks.
BOK Financial Corporation (NASDAQ:BOKF) investors should be aware of an increase in hedge fund interest recently. BOKF was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 16 hedge funds in our database with BOKF positions at the end of the previous quarter. Our calculations also showed that BOKF isn’t among the 30 most popular stocks among hedge funds.
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 32 percentage points since May 2014 through March 12, 2019 (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.
We’re going to take a gander at the latest hedge fund action encompassing BOK Financial Corporation (NASDAQ:BOKF).
What have hedge funds been doing with BOK Financial Corporation (NASDAQ:BOKF)?
At Q4’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in BOKF over the last 14 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
More specifically, Ariel Investments was the largest shareholder of BOK Financial Corporation (NASDAQ:BOKF), with a stake worth $65.3 million reported as of the end of September. Trailing Ariel Investments was Diamond Hill Capital, which amassed a stake valued at $48.4 million. Royce & Associates, Citadel Investment Group, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, key money managers have jumped into BOK Financial Corporation (NASDAQ:BOKF) headfirst. Forest Hill Capital, managed by Mark Lee, created the most outsized position in BOK Financial Corporation (NASDAQ:BOKF). Forest Hill Capital had $5.5 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $1.9 million position during the quarter. The other funds with new positions in the stock are Bernard Horn’s Polaris Capital Management, Phil Frohlich’s Prescott Group Capital Management, and Mario Gabelli’s GAMCO Investors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as BOK Financial Corporation (NASDAQ:BOKF) but similarly valued. We will take a look at Ternium S.A. (NYSE:TX), Arris International plc (NASDAQ:ARRS), Ciena Corporation (NYSE:CIEN), and Sonoco Products Company (NYSE:SON). This group of stocks’ market values match BOKF’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TX | 12 | 101262 | -2 |
| ARRS | 39 | 1059053 | 16 |
| CIEN | 29 | 332677 | 4 |
| SON | 17 | 108922 | -6 |
| Average | 24.25 | 400479 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.25 hedge funds with bullish positions and the average amount invested in these stocks was $400 million. That figure was $220 million in BOKF’s case. Arris International plc (NASDAQ:ARRS) is the most popular stock in this table. On the other hand Ternium S.A. (NYSE:TX) is the least popular one with only 12 bullish hedge fund positions. BOK Financial Corporation (NASDAQ:BOKF) 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 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on BOKF, though not to the same extent, as the stock returned 16.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
