How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Nordstrom, Inc. (NYSE:JWN).
Nordstrom, Inc. (NYSE:JWN) has experienced a decrease in hedge fund interest of late. Nordstrom, Inc. (NYSE:JWN) was in 31 hedge funds’ portfolios at the end of June. The all time high for this statistic is 38. There were 34 hedge funds in our database with JWN holdings at the end of March. Our calculations also showed that JWN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
To most traders, hedge funds are assumed to be underperforming, old investment vehicles of yesteryear. While there are greater than 8000 funds trading today, Our researchers hone in on the crème de la crème of this club, about 850 funds. These money managers direct bulk of all hedge funds’ total capital, and by keeping an eye on their first-class picks, Insider Monkey has determined numerous investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
John Overdeck of Two Sigma Advisors
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a peek at the fresh hedge fund action encompassing Nordstrom, Inc. (NYSE:JWN).
Do Hedge Funds Think JWN Is A Good Stock To Buy Now?
At the end of June, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in JWN a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Nordstrom, Inc. (NYSE:JWN) was held by Tremblant Capital, which reported holding $141.6 million worth of stock at the end of June. It was followed by Citadel Investment Group with a $66.8 million position. Other investors bullish on the company included Two Sigma Advisors, Schonfeld Strategic Advisors, and Millennium Management. In terms of the portfolio weights assigned to each position Empirical Capital Partners allocated the biggest weight to Nordstrom, Inc. (NYSE:JWN), around 8.72% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, earmarking 3.84 percent of its 13F equity portfolio to JWN.
Due to the fact that Nordstrom, Inc. (NYSE:JWN) has experienced falling interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few fund managers that decided to sell off their full holdings last quarter. Intriguingly, Robert Pohly’s Samlyn Capital dumped the largest position of all the hedgies watched by Insider Monkey, totaling close to $9 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund dumped about $8 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Nordstrom, Inc. (NYSE:JWN) but similarly valued. These stocks are Shell Midstream Partners LP (NYSE:SHLX), Unum Group (NYSE:UNM), Ardagh Group S.A. (NYSE:ARD), Nextera Energy Partners LP (NYSE:NEP), CoreSite Realty Corp (NYSE:COR), Element Solutions Inc. (NYSE:ESI), and A-Mark Precious Metals, Inc. (NASDAQ:AMKR). This group of stocks’ market caps are similar to JWN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SHLX | 4 | 32323 | 0 |
| UNM | 23 | 324091 | -10 |
| ARD | 13 | 135477 | 2 |
| NEP | 22 | 171287 | 5 |
| COR | 16 | 198819 | 1 |
| ESI | 23 | 682771 | -10 |
| AMKR | 19 | 154546 | -1 |
| Average | 17.1 | 242759 | -1.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $446 million in JWN’s case. Unum Group (NYSE:UNM) is the most popular stock in this table. On the other hand Shell Midstream Partners LP (NYSE:SHLX) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Nordstrom, Inc. (NYSE:JWN) is more popular among hedge funds. Our overall hedge fund sentiment score for JWN is 76.5. 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. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately JWN wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on JWN were disappointed as the stock returned -23.2% since the end of the second quarter (through 10/15) 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 most of these stocks already outperformed the market since 2019.
Follow Nordstrom Inc (NYSE:JWN)
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Disclosure: None. This article was originally published at Insider Monkey.
