Should You Avoid BlackRock, Inc. (BLK)?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at BlackRock, Inc. (NYSE:BLK) from the perspective of those elite funds.

BlackRock, Inc. (NYSE:BLK) has experienced a decrease in enthusiasm from smart money in recent months. BLK was in 33 hedge funds’ portfolios at the end of September. There were 35 hedge funds in our database with BLK positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as HDFC Bank Limited (ADR) (NYSE:HDB), The Dow Chemical Company (NYSE:DOW), and Thermo Fisher Scientific Inc. (NYSE:TMO) to gather more data points.

Today there are a multitude of signals stock traders put to use to evaluate publicly traded companies. Two of the most useful signals are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the elite investment managers can beat the broader indices by a very impressive amount (see the details here).

Keeping this in mind, let’s check out the key action regarding BlackRock, Inc. (NYSE:BLK).

What have hedge funds been doing with BlackRock, Inc. (NYSE:BLK)?

Heading into Q4, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 6% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Harding’s Winton Capital Management has the most valuable position in BlackRock, Inc. (NYSE:BLK), worth close to $60.9 million, corresponding to 0.5% of its total 13F portfolio. On Winton Capital Management’s heels is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $56.9 million position; 0.2% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions consist of Jim Simons’s Renaissance Technologies, Tom Gayner’s Markel Gayner Asset Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Since BlackRock, Inc. (NYSE:BLK) has faced falling interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers who sold off their positions entirely last quarter. It’s worth mentioning that Matthew Tewksbury’s Stevens Capital Management said goodbye to the biggest investment of the 700 funds tracked by Insider Monkey, comprising roughly $22.9 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $19.6 million worth of BLK shares. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let’s also examine hedge fund activity in other stocks similar to BlackRock, Inc. (NYSE:BLK). These stocks are HDFC Bank Limited (ADR) (NYSE:HDB), The Dow Chemical Company (NYSE:DOW), Thermo Fisher Scientific Inc. (NYSE:TMO), and Baidu.com, Inc. (ADR) (NASDAQ:BIDU). All of these stocks’ market caps are closest to BLK’s market cap.

As you can see these stocks had an average of 47 hedge funds with bullish positions and the average amount invested in these stocks was $3.54 billion. That figure was a meager $507 million in BLK’s case. The Dow Chemical Company (NYSE:DOW) is the most popular stock in this table, whereas HDFC Bank Limited (ADR) (NYSE:HDB) is the laggard with only 29 bullish hedge fund positions. BlackRock, Inc. (NYSE:BLK) 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. In this regard DOW might be a better candidate to consider a long position.