We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 fourth 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 years and analyze what the smart money thinks of BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) based on that data.
Is BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) a buy, sell, or hold? The best stock pickers are getting less optimistic. The number of bullish hedge fund bets shrunk by 4 in recent months. Our calculations also showed that BJ isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ricky Sandler of Eminence Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the recent hedge fund action regarding BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ).
How are hedge funds trading BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ)?
At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BJ over the last 18 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) was held by Sirios Capital Management, which reported holding $66.4 million worth of stock at the end of September. It was followed by Eminence Capital with a $45.8 million position. Other investors bullish on the company included Simcoe Capital Management, Armistice Capital, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Simcoe Capital Management allocated the biggest weight to BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), around 7.16% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, earmarking 4.28 percent of its 13F equity portfolio to BJ.
Because BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies that slashed their positions entirely heading into Q4. Interestingly, Stephen J. Errico’s Locust Wood Capital Advisers dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $18.7 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund sold off about $14.9 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). These stocks are United States Cellular Corporation (NYSE:USM), FS KKR Capital Corp. (NYSE:FSK), CenterState Bank Corporation (NASDAQ:CSFL), and Amkor Technology, Inc. (NASDAQ:AMKR). All of these stocks’ market caps match BJ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| USM | 21 | 132835 | 3 |
| FSK | 28 | 234006 | 2 |
| CSFL | 16 | 77742 | 3 |
| AMKR | 29 | 198950 | 2 |
| Average | 23.5 | 160883 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $191 million in BJ’s case. Amkor Technology, Inc. (NASDAQ:AMKR) is the most popular stock in this table. On the other hand CenterState Bank Corporation (NASDAQ:CSFL) is the least popular one with only 16 bullish hedge fund positions. BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on BJ as the stock returned 2.1% during the same time period and outperformed the market by an even larger margin.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
