Here is What Hedge Funds Think About Big Lots, Inc. (BIG)

In this article we will analyze whether Big Lots, Inc. (NYSE:BIG) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is Big Lots, Inc. (NYSE:BIG) a safe stock to buy now? Prominent investors were turning bullish. The number of long hedge fund bets improved by 3 recently. Big Lots, Inc. (NYSE:BIG) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistic is 26. Our calculations also showed that BIG isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 20 hedge funds in our database with BIG holdings at the end of March.

In the eyes of most market participants, hedge funds are seen as worthless, outdated financial vehicles of yesteryear. While there are more than 8000 funds in operation today, We hone in on the crème de la crème of this club, about 850 funds. These investment experts orchestrate most of all hedge funds’ total asset base, and by keeping track of their unrivaled investments, Insider Monkey has discovered several investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Fred DiSanto of Ancora Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a glance at the key hedge fund action regarding Big Lots, Inc. (NYSE:BIG).

Do Hedge Funds Think BIG Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in BIG a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, Mill Road Capital Management was the largest shareholder of Big Lots, Inc. (NYSE:BIG), with a stake worth $94.6 million reported as of the end of June. Trailing Mill Road Capital Management was Arrowstreet Capital, which amassed a stake valued at $34.8 million. Citadel Investment Group, Balyasny Asset Management, and Ancora Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mill Road Capital Management allocated the biggest weight to Big Lots, Inc. (NYSE:BIG), around 31.9% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, dishing out 0.34 percent of its 13F equity portfolio to BIG.

With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Schonfeld Strategic Advisors, managed by Ryan Tolkin (CIO), created the most valuable position in Big Lots, Inc. (NYSE:BIG). Schonfeld Strategic Advisors had $6 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $4 million position during the quarter. The following funds were also among the new BIG investors: Brian J. Higgins’s King Street Capital, Paul Tudor Jones’s Tudor Investment Corp, and Jinghua Yan’s TwinBeech Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Big Lots, Inc. (NYSE:BIG) but similarly valued. These stocks are Mueller Water Products, Inc. (NYSE:MWA), Cornerstone Building Brands, Inc. (NYSE:CNR), Winnebago Industries, Inc. (NYSE:WGO), Coeur Mining, Inc. (NYSE:CDE), Inter Parfums, Inc. (NASDAQ:IPAR), Avaya Holdings Corp. (NYSE:AVYA), and Harmony Gold Mining Company Limited (NYSE:HMY). This group of stocks’ market caps are similar to BIG’s market cap.

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As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $203 million in BIG’s case. Avaya Holdings Corp. (NYSE:AVYA) is the most popular stock in this table. On the other hand Harmony Gold Mining Company Limited (NYSE:HMY) is the least popular one with only 11 bullish hedge fund positions. Big Lots, Inc. (NYSE:BIG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BIG is 57.6. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately BIG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on BIG were disappointed as the stock returned -31.4% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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