You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Jernigan Capital Inc (NYSE:JCAP) the right investment to pursue these days? The best stock pickers are getting more bullish. The number of bullish hedge fund positions advanced by 5 recently. Our calculations also showed that JCAP isn’t among the 30 most popular stocks among hedge funds. JCAP was in 15 hedge funds’ portfolios at the end of the first quarter of 2019. There were 10 hedge funds in our database with JCAP holdings at the end of the previous quarter.
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 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.
Let’s take a gander at the new hedge fund action surrounding Jernigan Capital Inc (NYSE:JCAP).
What have hedge funds been doing with Jernigan Capital Inc (NYSE:JCAP)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from the fourth quarter of 2018. By comparison, 3 hedge funds held shares or bullish call options in JCAP a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Forward Management was the largest shareholder of Jernigan Capital Inc (NYSE:JCAP), with a stake worth $12.8 million reported as of the end of March. Trailing Forward Management was Shoals Capital Management, which amassed a stake valued at $8.9 million. Highland Capital Management, Ariel Investments, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, assembled the biggest position in Jernigan Capital Inc (NYSE:JCAP). Citadel Investment Group had $0.8 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.5 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Thomas Bailard’s Bailard Inc, and Cliff Asness’s AQR Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Jernigan Capital Inc (NYSE:JCAP). We will take a look at CalAmp Corp. (NASDAQ:CAMP), Container Store Group Inc (NYSE:TCS), Landmark Infrastructure Partners LP (NASDAQ:LMRK), and Rigel Pharmaceuticals, Inc. (NASDAQ:RIGL). This group of stocks’ market caps are similar to JCAP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CAMP | 15 | 85365 | 0 |
| TCS | 12 | 22644 | 1 |
| LMRK | 5 | 2531 | 1 |
| RIGL | 15 | 80038 | -1 |
| Average | 11.75 | 47645 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $41 million in JCAP’s case. CalAmp Corp. (NASDAQ:CAMP) is the most popular stock in this table. On the other hand Landmark Infrastructure Partners LP (NASDAQ:LMRK) is the least popular one with only 5 bullish hedge fund positions. Jernigan Capital Inc (NYSE:JCAP) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately JCAP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on JCAP were disappointed as the stock returned 2.3% during the same 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
