Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ).
Is BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) a buy, sell, or hold? Money managers are taking an optimistic view. The number of bullish hedge fund bets advanced by 10 lately. Our calculations also showed that BJ isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
We’re going to take a gander at the latest hedge fund action surrounding BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ).
How are hedge funds trading BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ)?
At Q3’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 45% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards BJ over the last 13 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the biggest position in BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), worth close to $107.7 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Sirios Capital Management, led by John Brennan, holding a $57.7 million position; 3% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish consist of Anand Parekh’s Alyeska Investment Group, Israel Englander’s Millennium Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.
With a general bullishness amongst the heavyweights, key money managers have jumped into BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). Marshall Wace LLP had $24.2 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $11.3 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.
Let’s now review hedge fund activity in other stocks similar to BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). We will take a look at FirstCash, Inc. (NASDAQ:FCFS), Grupo Financiero Galicia S.A. (NASDAQ:GGAL), Paramount Group Inc (NYSE:PGRE), and Magnolia Oil & Gas Corporation (NYSE:MGY). All of these stocks’ market caps are closest to BJ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FCFS | 16 | 183181 | -4 |
| GGAL | 15 | 85128 | -1 |
| PGRE | 12 | 290396 | -1 |
| MGY | 37 | 472490 | 14 |
| Average | 20 | 257799 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $257.80 billion. That figure was $413 million in BJ’s case. 0 is the most popular stock in this table. On the other hand Paramount Group Inc (NYSE:PGRE) is the least popular one with only 12 bullish hedge fund positions. BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) 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 MGY might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.