Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider J2 Global Inc (NASDAQ:JCOM) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
J2 Global Inc (NASDAQ:JCOM) has seen an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that JCOM isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most traders, hedge funds are assumed to be underperforming, outdated investment vehicles of the past. While there are over 8000 funds trading at the moment, We choose to focus on the top tier of this group, about 850 funds. These hedge fund managers handle the majority of all hedge funds’ total capital, and by paying attention to their inimitable investments, Insider Monkey has identified a number of investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Bruce Kovner of Caxton Associates LP
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the new hedge fund action surrounding J2 Global Inc (NASDAQ:JCOM).
How have hedgies been trading J2 Global Inc (NASDAQ:JCOM)?
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in JCOM a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Cliff Asness’s AQR Capital Management has the biggest position in J2 Global Inc (NASDAQ:JCOM), worth close to $91.3 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Amy Minella of Cardinal Capital, with a $86.3 million position; 2.6% of its 13F portfolio is allocated to the stock. Some other professional money managers with similar optimism encompass Ken Fisher’s Fisher Asset Management, D. E. Shaw’s D E Shaw and George McCabe’s Portolan Capital Management. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to J2 Global Inc (NASDAQ:JCOM), around 2.63% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, designating 1.67 percent of its 13F equity portfolio to JCOM.
As aggregate interest increased, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the most valuable position in J2 Global Inc (NASDAQ:JCOM). Arrowstreet Capital had $7.1 million invested in the company at the end of the quarter. Ali Motamed’s Invenomic Capital Management also made a $2.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Bruce Kovner’s Caxton Associates LP, and Donald Sussman’s Paloma Partners.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as J2 Global Inc (NASDAQ:JCOM) but similarly valued. These stocks are Copa Holdings, S.A. (NYSE:CPA), Armstrong World Industries, Inc. (NYSE:AWI), YPF Sociedad Anonima (NYSE:YPF), and The Boston Beer Company Inc (NYSE:SAM). This group of stocks’ market caps are similar to JCOM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CPA | 22 | 402542 | 1 |
| AWI | 24 | 550330 | -6 |
| YPF | 15 | 92848 | -5 |
| SAM | 26 | 577456 | -4 |
| Average | 21.75 | 405794 | -3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $406 million. That figure was $302 million in JCOM’s case. The Boston Beer Company Inc (NYSE:SAM) is the most popular stock in this table. On the other hand YPF Sociedad Anonima (NYSE:YPF) is the least popular one with only 15 bullish hedge fund positions. J2 Global Inc (NASDAQ:JCOM) 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. 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 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately JCOM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on JCOM were disappointed as the stock returned -29.7% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
