In this article we are going to use hedge fund sentiment as a tool and determine whether BlackLine, Inc. (NASDAQ:BL) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
BlackLine, Inc. (NASDAQ:BL) investors should be aware of a decrease in enthusiasm from smart money of late. BlackLine, Inc. (NASDAQ:BL) was in 17 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 20. Our calculations also showed that BL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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. 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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
David Harding of Winton Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Now let’s take a glance at the new hedge fund action regarding BlackLine, Inc. (NASDAQ:BL).
Do Hedge Funds Think BL Is A Good Stock To Buy Now?
At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the second quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in BL a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the number one position in BlackLine, Inc. (NASDAQ:BL). D E Shaw has a $104.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Toronado Partners, managed by Stephen Perkins, which holds a $38.6 million position; 10.8% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions comprise Israel Englander’s Millennium Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Toronado Partners allocated the biggest weight to BlackLine, Inc. (NASDAQ:BL), around 10.76% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.4 percent of its 13F equity portfolio to BL.
Due to the fact that BlackLine, Inc. (NASDAQ:BL) has witnessed declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedge funds who were dropping their entire stakes by the end of the third quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling close to $7.7 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also cut its stock, about $0.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to BlackLine, Inc. (NASDAQ:BL). We will take a look at Eastgroup Properties Inc (NYSE:EGP), Ingredion Incorporated (NYSE:INGR), First Industrial Realty Trust, Inc. (NYSE:FR), Nielsen Holdings plc (NYSE:NLSN), CoreSite Realty Corp (NYSE:COR), Apartment Investment and Management Co. (NYSE:AIV), and Nomad Foods Limited (NYSE:NOMD). All of these stocks’ market caps are similar to BL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EGP | 10 | 51895 | -4 |
| INGR | 23 | 243468 | 1 |
| FR | 26 | 418925 | -4 |
| NLSN | 30 | 943619 | -1 |
| COR | 19 | 163584 | -2 |
| AIV | 25 | 484646 | 1 |
| NOMD | 31 | 381203 | -3 |
| Average | 23.4 | 383906 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $384 million. That figure was $233 million in BL’s case. Nomad Foods Limited (NYSE:NOMD) is the most popular stock in this table. On the other hand Eastgroup Properties Inc (NYSE:EGP) is the least popular one with only 10 bullish hedge fund positions. BlackLine, Inc. (NASDAQ:BL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BL is 46.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on BL as the stock returned 38.1% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
