Should You Buy Blackbaud, Inc. (BLKB)?

It was a rough third quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 7% during the quarter. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by about 14 percentage points between June 25 and October 30, as investors fled less-known quantities for safe havens. This was the case with hedge funds, who we heard were pulling money from the market amid the volatility, which included money from small-cap stocks, which they invest in at a higher rate than other investors. This action contributed to the greater decline in these stocks during the tumultuous period. We will study how this market volatility affected their sentiment towards Blackbaud, Inc. (NASDAQ:BLKB) during the quarter below.

Blackbaud, Inc. (NASDAQ:BLKB) was in 15 hedge funds’ portfolios at the end of the third quarter of 2015. BLKB investors should pay attention to an increase in hedge fund sentiment in recent months. There were 11 hedge funds in our database with BLKB holdings 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 ProAssurance Corporation (NYSE:PRA), Valero Energy Partners LP (NYSE:VLP), and Aaron’s, Inc. (NYSE:AAN) to gather more data points.

At the moment there are dozens of gauges investors can use to grade stocks. Some of the best gauges are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best investment managers can trounce the broader indices by a solid amount (see the details here).

Keeping this in mind, we’re going to check out the fresh action encompassing Blackbaud, Inc. (NASDAQ:BLKB).

How have hedgies been trading Blackbaud, Inc. (NASDAQ:BLKB)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from one quarter earlier. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Robert G. Moses’s RGM Capital has the number one position in Blackbaud, Inc. (NASDAQ:BLKB), worth close to $57.4 million, corresponding to 7.7% of its total 13F portfolio. The second most bullish fund manager is Royce & Associates, managed by Chuck Royce, which holds a $21.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that hold long positions encompass Alex Duran and Scott Hendrickson’s Permian Investment Partners, Israel Englander’s Millennium Management and Jim Simons’s Renaissance Technologies.

As aggregate interest increased, specific money managers have jumped into Blackbaud, Inc. (NASDAQ:BLKB) headfirst. Millennium Management, managed by Israel Englander, assembled the largest position in Blackbaud, Inc. (NASDAQ:BLKB). Millennium Management had $14.8 million invested in the company at the end of the quarter. Drew Cupps’s Cupps Capital Management also made a $4.3 million investment in the stock during the quarter. The other funds with brand new BLKB positions are Andre F. Perold’s HighVista Strategies, Peter Muller’s PDT Partners, and Glenn Russell Dubin’s Highbridge Capital Management.

Let’s check out hedge fund activity in other stocks similar to Blackbaud, Inc. (NASDAQ:BLKB). These stocks are ProAssurance Corporation (NYSE:PRA), Valero Energy Partners LP (NYSE:VLP), Aaron’s, Inc. (NYSE:AAN), and Store Capital Corp (NYSE:STOR). All of these stocks’ market caps are similar to BLKB’s market cap.

As you can see these stocks had an average of 14.5 hedge funds with bullish positions and the average amount invested in these stocks was $522 million. That figure was $137 million in BLKB’s case. Aaron’s, Inc. (NYSE:AAN) is the most popular stock in this table. On the other hand Valero Energy Partners LP (NYSE:VLP) is the least popular one with only 5 bullish hedge fund positions. Blackbaud, Inc. (NASDAQ:BLKB) 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. In this regard AAN might be a better candidate to consider a long position.