Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about J Alexander’s Holdings Inc (NYSE:JAX) in this article.
Is J Alexander’s Holdings Inc (NYSE:JAX) going to take off soon? Prominent investors are getting less optimistic. The number of long hedge fund positions shrunk by 2 recently. Our calculations also showed that JAX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to review the new hedge fund action regarding J Alexander’s Holdings Inc (NYSE:JAX).
How are hedge funds trading J Alexander’s Holdings Inc (NYSE:JAX)?
Heading into the fourth quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in JAX a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in J Alexander’s Holdings Inc (NYSE:JAX) was held by Ancora Advisors, which reported holding $11.3 million worth of stock at the end of September. It was followed by Marathon Partners with a $7.1 million position. Other investors bullish on the company included Renaissance Technologies, GLG Partners, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Marathon Partners allocated the biggest weight to J Alexander’s Holdings Inc (NYSE:JAX), around 2.69% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, setting aside 0.5 percent of its 13F equity portfolio to JAX.
Because J Alexander’s Holdings Inc (NYSE:JAX) has experienced falling interest from the smart money, logic holds that there lies a certain “tier” of hedge funds that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that Michael M. Rothenberg’s Moab Capital Partners said goodbye to the largest stake of all the hedgies watched by Insider Monkey, worth an estimated $1.5 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund sold off about $0.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks similar to J Alexander’s Holdings Inc (NYSE:JAX). We will take a look at Enzo Biochem, Inc. (NYSE:ENZ), Forum Energy Technologies Inc (NYSE:FET), Bel Fuse, Inc. (NASDAQ:BELFA), and Malvern Bancorp, Inc. (NASDAQ:MLVF). All of these stocks’ market caps are similar to JAX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENZ | 10 | 38824 | 0 |
| FET | 16 | 19195 | -3 |
| BELFA | 4 | 5629 | 0 |
| MLVF | 4 | 32062 | 0 |
| Average | 8.5 | 23928 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $29 million in JAX’s case. Forum Energy Technologies Inc (NYSE:FET) is the most popular stock in this table. On the other hand Bel Fuse, Inc. (NASDAQ:BELFA) is the least popular one with only 4 bullish hedge fund positions. J Alexander’s Holdings Inc (NYSE:JAX) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately JAX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on JAX were disappointed as the stock returned -11.5% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
