Hedge Funds Aren’t Done Buying The TJX Companies, Inc. (TJX)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought The TJX Companies, Inc. (NYSE:TJX) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

The TJX Companies, Inc. (NYSE:TJX) investors should be aware of an increase in hedge fund sentiment lately. The TJX Companies, Inc. (NYSE:TJX) was in 72 hedge funds’ portfolios at the end of June. The all time high for this statistics is 69. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 69 hedge funds in our database with TJX positions at the end of the previous quarter. Our calculations also showed that TJX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s analyze the recent hedge fund action regarding The TJX Companies, Inc. (NYSE:TJX).

Hedge fund activity in The TJX Companies, Inc. (NYSE:TJX)

Heading into the third quarter of 2020, a total of 72 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TJX over the last 20 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

The largest stake in The TJX Companies, Inc. (NYSE:TJX) was held by Diamond Hill Capital, which reported holding $286.3 million worth of stock at the end of September. It was followed by BlueSpruce Investments with a $274.4 million position. Other investors bullish on the company included D E Shaw, Alkeon Capital Management, and Holocene Advisors. In terms of the portfolio weights assigned to each position Broad Bay Capital allocated the biggest weight to The TJX Companies, Inc. (NYSE:TJX), around 8.25% of its 13F portfolio. Stormborn Capital Management is also relatively very bullish on the stock, setting aside 8.15 percent of its 13F equity portfolio to TJX.

As one would reasonably expect, specific money managers have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, initiated the most outsized position in The TJX Companies, Inc. (NYSE:TJX). Viking Global had $76.9 million invested in the company at the end of the quarter. John Murphy’s Levin Easterly Partners also initiated a $54.3 million position during the quarter. The following funds were also among the new TJX investors: Richard Scott Greeder’s Broad Bay Capital, Alok Agrawal’s Bloom Tree Partners, and Anand Parekh’s Alyeska Investment Group.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as The TJX Companies, Inc. (NYSE:TJX) but similarly valued. We will take a look at Target Corporation (NYSE:TGT), General Electric Company (NYSE:GE), NetEase, Inc (NASDAQ:NTES), Duke Energy Corporation (NYSE:DUK), Activision Blizzard, Inc. (NASDAQ:ATVI), CME Group Inc (NASDAQ:CME), and Micron Technology, Inc. (NASDAQ:MU). This group of stocks’ market caps are similar to TJX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.4 hedge funds with bullish positions and the average amount invested in these stocks was $3148 million. That figure was $2348 million in TJX’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 33 bullish hedge fund positions. The TJX Companies, Inc. (NYSE:TJX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TJX is 68.5. 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. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 28.2% in 2020 through August 24th but beat the market by 20.6 percentage points. Unfortunately TJX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TJX were disappointed as the stock returned 5.6% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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