The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 24.4% through September 30th, vs. a gain of 20.4% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards J2 Global Inc (NASDAQ:JCOM), and what that likely means for the prospects of the company and its stock.
Is J2 Global Inc (NASDAQ:JCOM) a healthy stock for your portfolio? Investors who are in the know are in an optimistic mood. The number of long hedge fund positions inched up by 2 recently. Our calculations also showed that JCOM isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to review the key hedge fund action surrounding J2 Global Inc (NASDAQ:JCOM).
What does smart money think about J2 Global Inc (NASDAQ:JCOM)?
Heading into the third quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in JCOM a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in J2 Global Inc (NASDAQ:JCOM) was held by AQR Capital Management, which reported holding $80.6 million worth of stock at the end of March. It was followed by Cardinal Capital with a $66.1 million position. Other investors bullish on the company included GLG Partners, Royce & Associates, and D E Shaw.
As one would reasonably expect, specific money managers were leading the bulls’ herd. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the largest call position in J2 Global Inc (NASDAQ:JCOM). PEAK6 Capital Management had $3 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $1.7 million position during the quarter. The following funds were also among the new JCOM investors: David Harding’s Winton Capital Management, Michael Gelband’s ExodusPoint Capital, and Alec Litowitz and Ross Laser’s Magnetar Capital.
Let’s also examine hedge fund activity in other stocks similar to J2 Global Inc (NASDAQ:JCOM). These stocks are Ingevity Corporation (NYSE:NGVT), Virtu Financial Inc (NASDAQ:VIRT), Teradata Corporation (NYSE:TDC), and Echostar Corporation (NASDAQ:SATS). This group of stocks’ market values resemble JCOM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NGVT | 21 | 217334 | -2 |
| VIRT | 16 | 120585 | -1 |
| TDC | 22 | 280507 | 2 |
| SATS | 28 | 563065 | -1 |
| Average | 21.75 | 295373 | -0.5 |
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 $295 million. That figure was $309 million in JCOM’s case. Echostar Corporation (NASDAQ:SATS) is the most popular stock in this table. On the other hand Virtu Financial Inc (NASDAQ:VIRT) is the least popular one with only 16 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on JCOM, though not to the same extent, as the stock returned 2.2% during the third quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
