“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Barnes & Noble, Inc. (NYSE:BKS) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Barnes & Noble, Inc. (NYSE:BKS) investors should be aware of an increase in enthusiasm from smart money of late. Our calculations also showed that BKS isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s view the latest hedge fund action surrounding Barnes & Noble, Inc. (NYSE:BKS).
What have hedge funds been doing with Barnes & Noble, Inc. (NYSE:BKS)?
Heading into the second quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in BKS a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Lee Ainslie’s Maverick Capital has the number one position in Barnes & Noble, Inc. (NYSE:BKS), worth close to $9.6 million, corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by Himanshu Gulati of Antara Capital, with a $7.8 million position; 2.2% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions include Himanshu Gulati’s Antara Capital, Ken Griffin’s Citadel Investment Group and James Dondero’s Highland Capital Management.
With a general bullishness amongst the heavyweights, key hedge funds have been driving this bullishness. Blue Mountain Capital, managed by Andrew Feldstein and Stephen Siderow, established the biggest position in Barnes & Noble, Inc. (NYSE:BKS). Blue Mountain Capital had $0.8 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $0.4 million position during the quarter. The following funds were also among the new BKS investors: David Costen Haley’s HBK Investments, Matthew Tewksbury’s Stevens Capital Management, and Andrew Weiss’s Weiss Asset Management.
Let’s also examine hedge fund activity in other stocks similar to Barnes & Noble, Inc. (NYSE:BKS). We will take a look at Greenlight Capital Re, Ltd. (NASDAQ:GLRE), Kimball Electronics Inc (NASDAQ:KE), New Age Beverages Corporation (NASDAQ:NBEV), and Teekay Corporation (NYSE:TK). This group of stocks’ market values are closest to BKS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLRE | 3 | 1831 | -2 |
| KE | 10 | 23063 | 3 |
| NBEV | 8 | 9004 | 4 |
| TK | 10 | 16401 | 3 |
| Average | 7.75 | 12575 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $31 million in BKS’s case. Kimball Electronics Inc (NASDAQ:KE) is the most popular stock in this table. On the other hand Greenlight Capital Re, Ltd. (NASDAQ:GLRE) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Barnes & Noble, Inc. (NYSE:BKS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately BKS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BKS were disappointed as the stock returned -18.5% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
