Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first quarter. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards South Jersey Industries Inc (NYSE:SJI) to find out whether it was one of their high conviction long-term ideas.
South Jersey Industries Inc (NYSE:SJI) was in 11 hedge funds’ portfolios at the end of the first quarter of 2019. SJI investors should be aware of a decrease in hedge fund sentiment recently. There were 12 hedge funds in our database with SJI positions at the end of the previous quarter. Our calculations also showed that sji isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to analyze the recent hedge fund action regarding South Jersey Industries Inc (NYSE:SJI).
What have hedge funds been doing with South Jersey Industries Inc (NYSE:SJI)?
At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 6 hedge funds with a bullish position in SJI a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in South Jersey Industries Inc (NYSE:SJI) was held by Renaissance Technologies, which reported holding $14.1 million worth of stock at the end of March. It was followed by Diamond Hill Capital with a $13.9 million position. Other investors bullish on the company included Ancora Advisors, Adage Capital Management, and Luminus Management.
Judging by the fact that South Jersey Industries Inc (NYSE:SJI) has faced declining sentiment from hedge fund managers, it’s safe to say that there exists a select few hedgies that slashed their full holdings heading into Q3. It’s worth mentioning that D. E. Shaw’s D E Shaw said goodbye to the largest stake of the “upper crust” of funds monitored by Insider Monkey, valued at an estimated $13.2 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dropped about $5.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as South Jersey Industries Inc (NYSE:SJI) but similarly valued. We will take a look at Novanta Inc. (NASDAQ:NOVT), Federated Investors Inc (NYSE:FII), CVB Financial Corp. (NASDAQ:CVBF), and Chemical Financial Corporation (NASDAQ:CHFC). All of these stocks’ market caps are similar to SJI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NOVT | 17 | 122951 | -2 |
| FII | 13 | 131316 | -2 |
| CVBF | 12 | 41422 | 3 |
| CHFC | 18 | 96012 | 8 |
| Average | 15 | 97925 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $98 million. That figure was $60 million in SJI’s case. Chemical Financial Corporation (NASDAQ:CHFC) is the most popular stock in this table. On the other hand CVB Financial Corp. (NASDAQ:CVBF) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks South Jersey Industries Inc (NYSE:SJI) is even less popular than CVBF. 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. A small number of hedge funds were also right about betting on SJI, though not to the same extent, as the stock returned 5.8% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
