Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like J Alexander’s Holdings Inc (NYSE:JAX).
J Alexander’s Holdings Inc (NYSE:JAX) was in 12 hedge funds’ portfolios at the end of September. JAX has experienced a decrease in hedge fund sentiment of late. There were 14 hedge funds in our database with JAX positions at the end of the previous quarter. Our calculations also showed that JAX isn’t among the 30 most popular stocks among hedge funds.
According to most stock holders, hedge funds are assumed to be underperforming, outdated financial vehicles of the past. While there are more than 8,000 funds trading at the moment, We hone in on the moguls of this group, approximately 700 funds. These hedge fund managers command bulk of the smart money’s total asset base, and by observing their unrivaled picks, Insider Monkey has identified numerous investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outpaced the S&P 500 index by 6 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
Let’s check out the recent hedge fund action encompassing J Alexander’s Holdings Inc (NYSE:JAX).
How have hedgies been trading J Alexander’s Holdings Inc (NYSE:JAX)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in JAX heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in J Alexander’s Holdings Inc (NYSE:JAX) was held by Ancora Advisors, which reported holding $15.2 million worth of stock at the end of September. It was followed by Eminence Capital with a $13.5 million position. Other investors bullish on the company included Marathon Partners, Renaissance Technologies, and Birch Grove Capital.
Since J Alexander’s Holdings Inc (NYSE:JAX) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds that slashed their full holdings in the third quarter. At the top of the heap, Thomas Bailard’s Bailard Inc cut the biggest stake of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $0.2 million in call options, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund cut about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 2 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to J Alexander’s Holdings Inc (NYSE:JAX). These stocks are Miller/Howard High Income Equity Fund (NYSE:HIE), Misonix, Inc. (NASDAQ:MSON), Northern Dynasty Minerals Ltd. (NYSEAMEX:NAK), and Ohio Valley Banc Corp. (NASDAQ:OVBC). This group of stocks’ market valuations resemble JAX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HIE | 1 | 403 | 0 |
| MSON | 2 | 4619 | -1 |
| NAK | 3 | 8041 | -2 |
| OVBC | 1 | 2368 | 0 |
| Average | 1.75 | 3858 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 1.75 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $48 million in JAX’s case. Northern Dynasty Minerals Ltd. (NYSEAMEX:NAK) is the most popular stock in this table. On the other hand Miller/Howard High Income Equity Fund (NYSE:HIE) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks J Alexander’s Holdings Inc (NYSE:JAX) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
