Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Jefferies Financial Group Inc. (NYSE:JEF) based on that data.
Jefferies Financial Group Inc. (NYSE:JEF) was in 30 hedge funds’ portfolios at the end of the first quarter of 2020. JEF has experienced a decrease in activity from the world’s largest hedge funds of late. There were 31 hedge funds in our database with JEF positions at the end of the previous quarter. Our calculations also showed that JEF isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steve Leonard of Pacifica Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the fresh hedge fund action encompassing Jefferies Financial Group Inc. (NYSE:JEF).
How have hedgies been trading Jefferies Financial Group Inc. (NYSE:JEF)?
At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in JEF over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC has the most valuable position in Jefferies Financial Group Inc. (NYSE:JEF), worth close to $259.6 million, comprising 3.7% of its total 13F portfolio. Sitting at the No. 2 spot is Allan Mecham of Arlington Value Capital, with a $41.8 million position; 6.1% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish comprise Amit Wadhwaney’s Moerus Capital Management, Gregg J. Powers’s Private Capital Management and Steve Leonard’s Pacifica Capital Investments. In terms of the portfolio weights assigned to each position Moerus Capital Management allocated the biggest weight to Jefferies Financial Group Inc. (NYSE:JEF), around 14.55% of its 13F portfolio. Pacifica Capital Investments is also relatively very bullish on the stock, designating 7.27 percent of its 13F equity portfolio to JEF.
Since Jefferies Financial Group Inc. (NYSE:JEF) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers who sold off their full holdings heading into Q4. Interestingly, Daniel Beltzman and Gergory Smith’s Birch Run Capital dumped the biggest investment of all the hedgies watched by Insider Monkey, worth about $4.7 million in stock. Ray Dalio’s fund, Bridgewater Associates, also said goodbye to its stock, about $1.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Jefferies Financial Group Inc. (NYSE:JEF). We will take a look at Highwoods Properties Inc (NYSE:HIW), Grand Canyon Education Inc (NASDAQ:LOPE), ServiceMaster Global Holdings Inc (NYSE:SERV), and J2 Global Inc (NASDAQ:JCOM). This group of stocks’ market valuations are similar to JEF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HIW | 15 | 101293 | -1 |
| LOPE | 28 | 185626 | 8 |
| SERV | 31 | 593890 | -11 |
| JCOM | 21 | 219272 | -2 |
| Average | 23.75 | 275020 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $275 million. That figure was $402 million in JEF’s case. ServiceMaster Global Holdings Inc (NYSE:SERV) is the most popular stock in this table. On the other hand Highwoods Properties Inc (NYSE:HIW) is the least popular one with only 15 bullish hedge fund positions. Jefferies Financial Group Inc. (NYSE:JEF) 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 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 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately JEF wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on JEF were disappointed as the stock returned 8.4% 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.
Follow Jefferies Financial Group Inc. (NYSE:JEF)
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Disclosure: None. This article was originally published at Insider Monkey.
