Is J Alexander’s Holdings Inc (NYSE:JAX) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
J Alexander’s Holdings Inc (NYSE:JAX) was in 14 hedge funds’ portfolios at the end of March. JAX investors should be aware of an increase in hedge fund sentiment recently. There were 13 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s review the recent hedge fund action surrounding J Alexander’s Holdings Inc (NYSE:JAX).
What have hedge funds been doing with J Alexander’s Holdings Inc (NYSE:JAX)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in JAX a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
More specifically, Ancora Advisors was the largest shareholder of J Alexander’s Holdings Inc (NYSE:JAX), with a stake worth $12.3 million reported as of the end of March. Trailing Ancora Advisors was Marathon Partners, which amassed a stake valued at $9.6 million. Renaissance Technologies, Moab Capital Partners, and Birch Grove Capital were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, specific money managers were breaking ground themselves. Bailard Inc, managed by Thomas Bailard, initiated the most outsized position in J Alexander’s Holdings Inc (NYSE:JAX). Bailard Inc had $0.2 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also made a $0 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as J Alexander’s Holdings Inc (NYSE:JAX) but similarly valued. We will take a look at Colony Bankcorp Inc (NASDAQ:CBAN), StoneMor Partners L.P. (NYSE:STON), Inspired Entertainment, Inc. (NASDAQ:INSE), and AstroNova, Inc. (NASDAQ:ALOT). This group of stocks’ market valuations are closest to JAX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBAN | 4 | 17747 | 0 |
| STON | 4 | 46579 | 0 |
| INSE | 8 | 33693 | 0 |
| ALOT | 8 | 22280 | 1 |
| Average | 6 | 30075 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $30 million. That figure was $32 million in JAX’s case. Inspired Entertainment, Inc. (NASDAQ:INSE) is the most popular stock in this table. On the other hand Colony Bankcorp Inc (NASDAQ:CBAN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks J Alexander’s Holdings Inc (NYSE:JAX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on JAX as the stock returned 9.3% during the same period and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
