Best Buy Co., Inc. (NYSE:BBY) has been doubted many times before, by analysts who think that the old way of selling electronics is dead, or bears spouting that the company would be better off private. Would you believe it if we told you that Best Buy’s YTD return is a whopping 184%! Look it up, we dare you.
Eighteen months ago, a gain like that in the first three quarters of 2013 would have sounded like a pipe dream. So what are the world’s smartest investors doing now? Buying of course!
According to most market participants, hedge funds are seen as unimportant, outdated investment tools of the past. While there are greater than 8000 funds trading today, we choose to focus on the leaders of this group, close to 450 funds. It is widely believed that this group oversees most of all hedge funds’ total capital, and by monitoring their highest performing investments, we have found a number of investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 33 percentage points in 11 months (see the details here).
Equally as integral, optimistic insider trading sentiment is another way to break down the stock market universe. Just as you’d expect, there are a variety of stimuli for an insider to sell shares of his or her company, but only one, very clear reason why they would buy. Many academic studies have demonstrated the useful potential of this strategy if you know where to look (learn more here).
With these “truths” under our belt, it’s important to take a gander at the recent action regarding Best Buy Co., Inc. (NYSE:BBY).
Hedge fund activity in Best Buy Co., Inc. (NYSE:BBY)
At the end of the second quarter, a total of 39 of the hedge funds we track were bullish in this stock, a change of 8% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably.
Of the funds we track, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Best Buy Co., Inc. (NYSE:BBY). AQR Capital Management has a $81 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is Alexander Mitchell of Scopus Asset Management, with a $71.1 million position; the fund has 2% of its 13F portfolio invested in the stock. Other peers that hold long positions include Ken Griffin’s Citadel Investment Group, Steven Cohen’s SAC Capital Advisors and Curtis Macnguyen’s Ivory Capital (Investment Mgmt).
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. AQR Capital Management, managed by Cliff Asness, assembled the most outsized position in Best Buy Co., Inc. (NYSE:BBY). AQR Capital Management had 81 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also made a $71.1 million investment in the stock during the quarter. The following funds were also among the new BBY investors: Ken Griffin’s Citadel Investment Group, Steven Cohen’s SAC Capital Advisors, and Curtis Macnguyen’s Ivory Capital (Investment Mgmt).
Insider trading activity in Best Buy Co., Inc. (NYSE:BBY)
Insider buying is at its handiest when the company we’re looking at has experienced transactions within the past 180 days. Over the latest six-month time period, Best Buy Co., Inc. (NYSE:BBY) has experienced zero unique insiders buying, and 7 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Best Buy Co., Inc. (NYSE:BBY). These stocks are RadioShack Corporation (NYSE:RSH), hhgregg, Inc. (NYSE:HGG), CONN’S, Inc. (NASDAQ:CONN), , and GameStop Corp. (NYSE:GME). This group of stocks are the members of the electronics stores industry and their market caps are closest to BBY’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| RadioShack Corporation (NYSE:RSH) | 20 | 2 | 0 |
| hhgregg, Inc. (NYSE:HGG) | 13 | 0 | 7 |
| CONN’S, Inc. (NASDAQ:CONN) | 23 | 1 | 17 |
| GameStop Corp. (NYSE:GME) | 21 | 0 | 0 |
With the results demonstrated by our tactics, retail investors should always keep an eye on hedge fund and insider trading activity, and Best Buy Co., Inc. (NYSE:BBY) shareholders fit into this picture quite nicely.
