Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards BJ’s Restaurants, Inc. (NASDAQ:BJRI).
Is BJ’s Restaurants, Inc. (NASDAQ:BJRI) a first-rate stock to buy now? Hedge funds are getting less bullish. The number of bullish hedge fund positions dropped by 2 lately. Our calculations also showed that bjri isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman, GLG Partners
We’re going to check out the key hedge fund action regarding BJ’s Restaurants, Inc. (NASDAQ:BJRI).
What does the smart money think about BJ’s Restaurants, Inc. (NASDAQ:BJRI)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in BJRI over the last 15 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in BJ’s Restaurants, Inc. (NASDAQ:BJRI). Arrowstreet Capital has a $32.3 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Israel Englander of Millennium Management, with a $27.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Paul Marshall and Ian Wace’s Marshall Wace LLP, John Overdeck and David Siegel’s Two Sigma Advisors and Noam Gottesman’s GLG Partners.
Since BJ’s Restaurants, Inc. (NASDAQ:BJRI) has experienced falling interest from the smart money, it’s safe to say that there was a specific group of funds who sold off their full holdings in the third quarter. Interestingly, Principal Global Investors’s Columbus Circle Investors dumped the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $7.4 million in stock, and Anthony Joseph Vaccarino’s North Fourth Asset Management was right behind this move, as the fund dumped about $5.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to BJ’s Restaurants, Inc. (NASDAQ:BJRI). We will take a look at Sandstorm Gold Ltd. (NYSE:SAND), Hailiang Education Group Inc. (NASDAQ:HLG), Bain Capital Specialty Finance, Inc. (NYSE:BCSF), and Playa Hotels & Resorts N.V. (NASDAQ:PLYA). All of these stocks’ market caps resemble BJRI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SAND | 12 | 44973 | 3 |
| HLG | 3 | 5277 | 0 |
| BCSF | 2 | 29694 | -1 |
| PLYA | 19 | 415878 | -1 |
| Average | 9 | 123956 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $151 million in BJRI’s case. Playa Hotels & Resorts N.V. (NASDAQ:PLYA) is the most popular stock in this table. On the other hand Bain Capital Specialty Finance, Inc. (NYSE:BCSF) is the least popular one with only 2 bullish hedge fund positions. BJ’s Restaurants, Inc. (NASDAQ:BJRI) is not the most popular stock in this group but hedge fund interest is still above average. 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 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 BJRI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BJRI were disappointed as the stock returned -8.8% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
