Hedge Funds Are Piling Into Big 5 Sporting Goods Corporation (BGFV)

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Big 5 Sporting Goods Corporation (NASDAQ:BGFV) changed recently.

Is Big 5 Sporting Goods Corporation (NASDAQ:BGFV) going to take off soon? The smart money was in a bullish mood. The number of long hedge fund positions rose by 5 in recent months. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) was in 19 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BGFV isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 S&P 500 ETFs by 79 percentage points since March 2017 (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.

David E. Shaw of D.E. Shaw

With all of this in mind let’s analyze the recent hedge fund action regarding Big 5 Sporting Goods Corporation (NASDAQ:BGFV).

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

At second quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in BGFV a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Lonestar Capital Management held the most valuable stake in Big 5 Sporting Goods Corporation (NASDAQ:BGFV), which was worth $9.7 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $7.8 million worth of shares. Millennium Management, PDT Partners, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Lonestar Capital Management allocated the biggest weight to Big 5 Sporting Goods Corporation (NASDAQ:BGFV), around 1.42% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, earmarking 0.26 percent of its 13F equity portfolio to BGFV.

Now, key money managers were leading the bulls’ herd. D E Shaw, managed by D. E. Shaw, created the most outsized position in Big 5 Sporting Goods Corporation (NASDAQ:BGFV). D E Shaw had $2.8 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $2.3 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, D. E. Shaw’s D E Shaw, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Big 5 Sporting Goods Corporation (NASDAQ:BGFV) but similarly valued. We will take a look at Ebang International Holdings Inc. (NASDAQ:EBON), Catchmark Timber Trust Inc (NYSE:CTT), IVERIC bio, Inc. (NASDAQ:ISEE), ShotSpotter, Inc. (NASDAQ:SSTI), ZIOPHARM Oncology Inc. (NASDAQ:ZIOP), Entravision Communications Corporation (NYSE:EVC), and Thermon Group Holdings, Inc. (NYSE:THR). This group of stocks’ market values resemble BGFV’s market value.

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As you can see these stocks had an average of 12.9 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $43 million in BGFV’s case. IVERIC bio, Inc. (NASDAQ:ISEE) is the most popular stock in this table. On the other hand Ebang International Holdings Inc. (NASDAQ:EBON) is the least popular one with only 5 bullish hedge fund positions. Big 5 Sporting Goods Corporation (NASDAQ:BGFV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BGFV is 73.3. 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. 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 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 beat the market again by 1.6 percentage points. Unfortunately BGFV wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BGFV were disappointed as the stock returned -4.3% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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