Hedge Funds Are Dumping BlackLine, Inc. (BL)

·6 min read

In this article we will take a look at whether hedge funds think BlackLine, Inc. (NASDAQ:BL) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

BlackLine, Inc. (NASDAQ:BL) was in 20 hedge funds' portfolios at the end of June. The all time high for this statistic is 24. BL has seen a decrease in activity from the world's largest hedge funds recently. There were 24 hedge funds in our database with BL holdings at the end of March. Our calculations also showed that BL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Tim Woolley of Polar Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy 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. 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. With all of this in mind we're going to take a gander at the new hedge fund action encompassing BlackLine, Inc. (NASDAQ:BL).

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

At Q2's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BL over the last 24 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D. E. Shaw's D E Shaw has the largest position in BlackLine, Inc. (NASDAQ:BL), worth close to $68.3 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Millennium Management, led by Israel Englander, holding a $49.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish encompass Amit Nitin Doshi's Harbor Spring Capital, Stephen Perkins's Toronado Partners and Brian Ashford-Russell and Tim Woolley's Polar Capital. In terms of the portfolio weights assigned to each position Toronado Partners allocated the biggest weight to BlackLine, Inc. (NASDAQ:BL), around 9.66% of its 13F portfolio. Andar Capital is also relatively very bullish on the stock, earmarking 4.33 percent of its 13F equity portfolio to BL.

Because BlackLine, Inc. (NASDAQ:BL) has witnessed a decline in interest from the aggregate hedge fund industry, it's easy to see that there exists a select few fund managers that slashed their full holdings last quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital dumped the biggest stake of the "upper crust" of funds tracked by Insider Monkey, totaling an estimated $7.8 million in stock. Robert Henry Lynch's fund, Aristeia Capital, also cut its stock, about $6.2 million worth. These moves are interesting, as total hedge fund interest was cut by 4 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as BlackLine, Inc. (NASDAQ:BL) but similarly valued. We will take a look at American Campus Communities, Inc. (NYSE:ACC), Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), Affiliated Managers Group, Inc. (NYSE:AMG), DCP Midstream LP (NYSE:DCP), Foot Locker, Inc. (NYSE:FL), and 360 DigiTech, Inc. (NASDAQ:QFIN). All of these stocks' market caps are closest to BL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACC,21,222547,-5 RARE,32,770180,7 WSC,52,1399877,5 AMG,30,784733,4 DCP,3,31363,-1 FL,31,416162,3 QFIN,14,82360,-5 Average,26.1,529603,1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $530 million. That figure was $266 million in BL's case. WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 3 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 43.3. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on BL as the stock returned 12.7% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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

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