“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on J2 Global Inc (NASDAQ:JCOM) in order to identify whether reputable and successful top money managers continue to believe in its potential.
J2 Global Inc (NASDAQ:JCOM) has seen an increase in enthusiasm from smart money of late. Our calculations also showed that jcom 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.
We’re going to take a peek at the new hedge fund action encompassing J2 Global Inc (NASDAQ:JCOM).
What have hedge funds been doing with J2 Global Inc (NASDAQ:JCOM)?
At Q1’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in JCOM over the last 15 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the number one position in J2 Global Inc (NASDAQ:JCOM). AQR Capital Management has a $75.5 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Cardinal Capital, managed by Amy Minella, which holds a $65.9 million position; 2.2% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish encompass Noam Gottesman’s GLG Partners, Chuck Royce’s Royce & Associates and D. E. Shaw’s D E Shaw.
Now, key hedge funds have jumped into J2 Global Inc (NASDAQ:JCOM) headfirst. Oaktree Capital Management, managed by Howard Marks, initiated the most outsized position in J2 Global Inc (NASDAQ:JCOM). Oaktree Capital Management had $10.7 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $6.2 million position during the quarter. The other funds with brand new JCOM positions are Israel Englander’s Millennium Management, Bart Baum’s Ionic Capital Management, and Brian C. Freckmann’s Lyon Street Capital.
Let’s now take a look at hedge fund activity in other stocks similar to J2 Global Inc (NASDAQ:JCOM). These stocks are Ryman Hospitality Properties, Inc. (NYSE:RHP), Taro Pharmaceutical Industries Ltd. (NYSE:TARO), The Goodyear Tire & Rubber Company (NASDAQ:GT), and TriNet Group Inc (NYSE:TNET). This group of stocks’ market values resemble JCOM’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RHP | 18 | 477090 | 0 |
| TARO | 10 | 74462 | 2 |
| GT | 19 | 348140 | -11 |
| TNET | 24 | 416936 | 7 |
| Average | 17.75 | 329157 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $329 million. That figure was $264 million in JCOM’s case. TriNet Group Inc (NYSE:TNET) is the most popular stock in this table. On the other hand Taro Pharmaceutical Industries Ltd. (NYSE:TARO) is the least popular one with only 10 bullish hedge fund positions. J2 Global Inc (NASDAQ:JCOM) 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 JCOM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on JCOM were disappointed as the stock returned -1.3% 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.
