Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively, during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of BlueLinx Holdings Inc. (NYSE:BXC).
The 53% drop registered by BlueLinx Holdings Inc. (NYSE:BXC)’s stock since the beginning of the year, led to investors selling their holdings and, in the third quarter, the number of bullish hedge fund positions (among the funds we track) decreased by 3. BXC was in 7 hedge funds’ portfolios at the end of September. At the end of this article we will also compare BXC to other stocks, including RCS Capital Corp (NYSE:RCAP), Quest Resource Holding Corp (NASDAQ:QRHC), and ReachLocal Inc. (NASDAQ:RLOC) to get a better sense of its popularity.
Follow Bluelinx Holdings Inc. (NYSE:BXC)
Follow Bluelinx Holdings Inc. (NYSE:BXC)
If you’d ask most stock holders, hedge funds are perceived as worthless, old financial tools of years past. While there are greater than 8000 funds in operation today, Our researchers choose to focus on the bigwigs of this club, about 700 funds. Most estimates calculate that this group of people control the majority of the smart money’s total asset base, and by following their top equity investments, Insider Monkey has unsheathed several investment strategies that have historically surpassed the market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Now, let’s take a peek at the key action regarding BlueLinx Holdings Inc. (NYSE:BXC).
How are hedge funds trading BlueLinx Holdings Inc. (NYSE:BXC)?
Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a decline of 30% from the previous quarter. Nevertheless, there were several funds that held substantial holdings in the company as of the end of September.
When looking at the institutional investors followed by Insider Monkey, Stephen Feinberg’s Cerberus Capital Management has the largest position in BlueLinx Holdings Inc. (NYSE:BXC), worth close to $33 million, comprising 2.7% of its total 13F portfolio. Sitting at the No. 2 spot is Clint Carlson’s Carlson Capital, with a $4.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. The remaining peers with similar optimism include Phil Frohlich’s Prescott Group Capital Management, Alexander Medina Seaver’s Stadium Capital Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.
Due to the fact that BlueLinx Holdings Inc. (NYSE:BXC) has faced a declination in interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies who sold off their full holdings in the third quarter. At the top of the heap, Joseph A. Jolson’s Harvest Capital Strategies dropped the largest investment of the 700 funds tracked by Insider Monkey, totaling about $1.6 million in stock.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as BlueLinx Holdings Inc. (NYSE:BXC) but similarly valued. These stocks are RCS Capital Corp (NYSE:RCAP), Quest Resource Holding Corp (NASDAQ:QRHC), ReachLocal Inc. (NASDAQ:RLOC), and Sunesis Pharmaceuticals, Inc. (NASDAQ:SNSS). This group of stocks’ market valuations match BXC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RCAP | 15 | 16564 | -4 |
| QRHC | 7 | 3094 | 0 |
| RLOC | 6 | 9842 | -1 |
| SNSS | 13 | 17673 | -6 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $12 million, which is lower than the $46 million in BXC’s case. RCS Capital Corp (NYSE:RCAP) is the most popular stock in this table. On the other hand ReachLocal Inc. (NASDAQ:RLOC) is the least popular one with only 6 bullish hedge fund positions. BlueLinx Holdings Inc. (NYSE:BXC) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard RCAP might be a better candidate to consider a long position.
