Were Hedge Funds Right About Benefitfocus Inc (BNFT)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Benefitfocus Inc (NASDAQ:BNFT).

Is Benefitfocus Inc (NASDAQ:BNFT) the right pick for your portfolio? Prominent investors were betting on the stock. The number of bullish hedge fund positions increased by 3 recently. Benefitfocus Inc (NASDAQ:BNFT) was in 17 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 22. Our calculations also showed that BNFT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 14 hedge funds in our database with BNFT holdings at the end of December.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a gander at the new hedge fund action encompassing Benefitfocus Inc (NASDAQ:BNFT).

Do Hedge Funds Think BNFT Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BNFT over the last 23 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Indaba Capital Management held the most valuable stake in Benefitfocus Inc (NASDAQ:BNFT), which was worth $42.8 million at the end of the fourth quarter. On the second spot was Ancient Art (Teton Capital) which amassed $13.1 million worth of shares. Toronado Partners, Lynrock Lake, and VIEX Capital 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 Indaba Capital Management allocated the biggest weight to Benefitfocus Inc (NASDAQ:BNFT), around 5.38% of its 13F portfolio. VIEX Capital Advisors is also relatively very bullish on the stock, dishing out 5.18 percent of its 13F equity portfolio to BNFT.

As one would reasonably expect, specific money managers were breaking ground themselves. Lynrock Lake, managed by Cynthia Paul, created the biggest position in Benefitfocus Inc (NASDAQ:BNFT). Lynrock Lake had $8.2 million invested in the company at the end of the quarter. Cliff Asness’s AQR Capital Management also initiated a $0.5 million position during the quarter. The following funds were also among the new BNFT investors: Matthew Hulsizer’s PEAK6 Capital Management, Peter Algert’s Algert Global, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Benefitfocus Inc (NASDAQ:BNFT) but similarly valued. We will take a look at Fusion Pharmaceuticals Inc. (NASDAQ:FUSN), ANI Pharmaceuticals Inc (NASDAQ:ANIP), Universal Insurance Holdings, Inc. (NYSE:UVE), Flexion Therapeutics Inc (NASDAQ:FLXN), Lucira Health, Inc. (NASDAQ:LHDX), Jiayin Group Inc. (NASDAQ:JFIN), and Sensei Biotherapeutics, Inc. (NASDAQ:SNSE). This group of stocks’ market valuations are closest to BNFT’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $103 million in BNFT’s case. Flexion Therapeutics Inc (NASDAQ:FLXN) is the most popular stock in this table. On the other hand Jiayin Group Inc. (NASDAQ:JFIN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Benefitfocus Inc (NASDAQ:BNFT) is more popular among hedge funds. Our overall hedge fund sentiment score for BNFT is 81.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately BNFT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BNFT were disappointed as the stock returned -5.4% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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