How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Black Knight, Inc. (NYSE:BKI) and determine whether hedge funds had an edge regarding this stock.
Is Black Knight, Inc. (NYSE:BKI) a superb investment now? The best stock pickers were taking an optimistic view. The number of long hedge fund bets advanced by 5 recently. Black Knight, Inc. (NYSE:BKI) was in 38 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 45. Our calculations also showed that BKI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 33 hedge funds in our database with BKI positions at the end of the second quarter.
David E. Shaw of D.E. Shaw
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to go over the key hedge fund action regarding Black Knight, Inc. (NYSE:BKI).
Do Hedge Funds Think BKI Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BKI over the last 25 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Third Point was the largest shareholder of Black Knight, Inc. (NYSE:BKI), with a stake worth $129.6 million reported as of the end of September. Trailing Third Point was Echo Street Capital Management, which amassed a stake valued at $114.4 million. D E Shaw, Citadel Investment Group, and Junto Capital Management 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 Lionstone Capital Management allocated the biggest weight to Black Knight, Inc. (NYSE:BKI), around 8.97% of its 13F portfolio. Aravt Global is also relatively very bullish on the stock, designating 8.88 percent of its 13F equity portfolio to BKI.
As industrywide interest jumped, key money managers have jumped into Black Knight, Inc. (NYSE:BKI) headfirst. Junto Capital Management, managed by James Parsons, established the biggest position in Black Knight, Inc. (NYSE:BKI). Junto Capital Management had $43.2 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $20.7 million position during the quarter. The following funds were also among the new BKI investors: Peter Seuss’s Prana Capital Management, Greg Eisner’s Engineers Gate Manager, and Jinghua Yan’s TwinBeech Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Black Knight, Inc. (NYSE:BKI). These stocks are Snap-on Incorporated (NYSE:SNA), Targa Resources Corp (NYSE:TRGP), Robert Half International Inc. (NYSE:RHI), UWM Holdings Corporation Class (NYSE:UWMC), Morningstar, Inc. (NASDAQ:MORN), Centrais Eletricas Brasileiras SA (NYSE:EBR), and Invesco Ltd. (NYSE:IVZ). This group of stocks’ market caps resemble BKI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNA | 29 | 551227 | -2 |
| TRGP | 26 | 567252 | 0 |
| RHI | 27 | 318494 | 4 |
| UWMC | 16 | 32122 | -4 |
| MORN | 26 | 1645201 | 2 |
| EBR | 6 | 3756 | 1 |
| IVZ | 38 | 1355213 | -2 |
| Average | 24 | 639038 | -0.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $639 million. That figure was $775 million in BKI’s case. Invesco Ltd. (NYSE:IVZ) is the most popular stock in this table. On the other hand Centrais Eletricas Brasileiras SA (NYSE:EBR) is the least popular one with only 6 bullish hedge fund positions. Black Knight, Inc. (NYSE:BKI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BKI is 85.3. 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on BKI as the stock returned 3.6% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.
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Disclosure: None. This article was originally published at Insider Monkey.
