We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards J&J Snack Foods Corp. (NASDAQ:JJSF), and what that likely means for the prospects of the company and its stock.
J&J Snack Foods Corp. (NASDAQ:JJSF) was in 10 hedge funds’ portfolios at the end of September. JJSF has seen an increase in enthusiasm from smart money in recent months. There were 9 hedge funds in our database with JJSF holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Boyd Gaming Corporation (NYSE:BYD), Healthequity Inc (NASDAQ:HQY), and Watts Water Technologies Inc (NYSE:WTS) to gather more data points.
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Hedge fund activity in J&J Snack Foods Corp. (NASDAQ:JJSF)
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 11% from the second quarter of 2016. By comparison, 7 hedge funds held shares or bullish call options in JJSF heading into this year. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies, one of the largest hedge funds in the world, holds the number one position in J&J Snack Foods Corp. (NASDAQ:JJSF) which has a $38.1 million position in the stock. Coming in second is Ken Fisher of Fisher Asset Management which holds a $6.5 million position. Remaining peers that are bullish consist of Mario Gabelli’s GAMCO Investors, John Overdeck and David Siegel’s Two Sigma Advisors and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Magnetar Capital, led by Alec Litowitz and Ross Laser, created the most outsized position in J&J Snack Foods Corp. (NASDAQ:JJSF). Magnetar Capital had $0.4 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.
Let’s go over hedge fund activity in other stocks similar to J&J Snack Foods Corp. (NASDAQ:JJSF). These stocks are Boyd Gaming Corporation (NYSE:BYD), Healthequity Inc (NASDAQ:HQY), Watts Water Technologies Inc (NYSE:WTS), and PBF Energy Inc (NYSE:PBF). This group of stocks’ market valuations resemble JJSF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BYD | 23 | 667524 | -4 |
| HQY | 12 | 56301 | 2 |
| WTS | 11 | 433841 | -2 |
| PBF | 23 | 497804 | -1 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $414 million. That figure was $55 million in JJSF’s case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand Watts Water Technologies Inc (NYSE:WTS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks J&J Snack Foods Corp. (NASDAQ:JJSF) is even less popular than WTS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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