Big Lots, Inc. (NYSE:BIG) has surged by nearly 10% in trading this morning after posting better than expected first quarter financial results. The Ohio-based discount retailer reported EPS of $0.82, beating estimates of $0.70, while revenue increased by 2.5% year-over-year to $1.31 billion, narrowly topping estimates of $1.30 billion. Comparable-store sales increased by 3%, while profit rose by 20%. For the full 2016 year, the company is expecting EPS in the range of $3.35 to $3.50, topping the consensus of $3.30. Big Lots CEO, David Campisi, said that customers’ response to the company’s strategic focus on “ownable and winnable” merchandise categories was positive in the quarter.
Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proven that they have great stock picking abilities. We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insight into how the brightest minds in the finance industry feel about specific stocks. After all, these people have access to smart analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Big Lots, Inc. (NYSE:BIG)? The smart money sentiment can provide an answer to this question.
Is Big Lots, Inc. (NYSE:BIG) undervalued? The smart money is in an optimistic mood. The number of long hedge fund bets increased by 1 in the first quarter. At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a 5% increase from one quarter earlier. At the end of this article we will also compare BIG to other stocks including Lithia Motors Inc (NYSE:LAD), Kite Pharma Inc (NASDAQ:KITE), and Kosmos Energy Ltd (NYSE:KOS) to get a better sense of its popularity.
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When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Big Lots, Inc. (NYSE:BIG). AQR Capital Management has a $80.4 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Gotham Asset Management, managed by Joel Greenblatt, which holds a $14.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Jim Simons’ Renaissance Technologies, Israel Englander’s Millennium Management, and John Tompkins’ Tyvor Capital.
On the next page we’ll look at some funds that took up positions in Big Lots during Q1, as well as compare the stock to a handful of others with similar market caps.
Consequently, specific money managers were breaking ground in BIG themselves. Hutchin Hill Capital, managed by Neil Chriss, initiated the most outsized position in Big Lots, Inc. (NYSE:BIG). Hutchin Hill Capital had $5.5 million invested in the company at the end of the quarter. Mike Vranos’ Ellington also initiated a $2.1 million position during the quarter. The only other fund with a brand new BIG position was Dmitry Balyasny’s Balyasny Asset Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Big Lots, Inc. (NYSE:BIG) but similarly valued. We will take a look at Lithia Motors Inc (NYSE:LAD), Kite Pharma Inc (NASDAQ:KITE), Kosmos Energy Ltd (NYSE:KOS), and Snyder S Lance Inc (NASDAQ:LNCE). This group of stocks’ market caps are closest to BIG’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LAD | 28 | 155672 | 3 |
| KITE | 23 | 311900 | -4 |
| KOS | 7 | 19932 | -2 |
| LNCE | 15 | 251366 | -3 |
As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $165 million in BIG’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand Kosmos Energy Ltd (NYSE:KOS) is the least popular one with only 7 bullish hedge fund positions. Big Lots, Inc. (NYSE:BIG) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LAD might be a better candidate to consider a long position.
Disclosure: None
