Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Jabil Inc. (NYSE:JBL).
Is JBL a good stock to buy now? Hedge fund interest in Jabil Inc. (NYSE:JBL) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that JBL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare JBL to other stocks including Dicks Sporting Goods Inc (NYSE:DKS), Flowers Foods, Inc. (NYSE:FLO), and Tetra Tech, Inc. (NASDAQ:TTEK) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Phillip Gross of Adage Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a look at the recent hedge fund action regarding Jabil Inc. (NYSE:JBL).
Do Hedge Funds Think JBL Is A Good Stock To Buy Now?
At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JBL over the last 21 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in Jabil Inc. (NYSE:JBL). AQR Capital Management has a $103.2 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Point72 Asset Management, managed by Steve Cohen, which holds a $76.3 million position; 0.4% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that hold long positions comprise Anand Parekh’s Alyeska Investment Group, Phill Gross and Robert Atchinson’s Adage Capital Management and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital. In terms of the portfolio weights assigned to each position Breakline Capital allocated the biggest weight to Jabil Inc. (NYSE:JBL), around 3.41% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, setting aside 2.05 percent of its 13F equity portfolio to JBL.
Because Jabil Inc. (NYSE:JBL) has faced declining sentiment from the smart money, it’s safe to say that there was a specific group of money managers that decided to sell off their entire stakes heading into Q4. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management dropped the biggest position of the 750 funds followed by Insider Monkey, comprising about $16.2 million in stock. Qing Li’s fund, Sciencast Management, also dumped its stock, about $2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Jabil Inc. (NYSE:JBL) but similarly valued. We will take a look at Dicks Sporting Goods Inc (NYSE:DKS), Flowers Foods, Inc. (NYSE:FLO), Tetra Tech, Inc. (NASDAQ:TTEK), Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), Sonoco Products Company (NYSE:SON), Blueprint Medicines Corporation (NASDAQ:BPMC), and ITT Inc. (NYSE:ITT). All of these stocks’ market caps match JBL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DKS | 41 | 626418 | 1 |
| FLO | 30 | 298843 | 6 |
| TTEK | 22 | 88894 | 3 |
| AVAL | 4 | 9119 | -5 |
| SON | 29 | 149777 | 4 |
| BPMC | 34 | 1220886 | -4 |
| ITT | 30 | 477657 | 5 |
| Average | 27.1 | 410228 | 1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $410 million. That figure was $400 million in JBL’s case. Dicks Sporting Goods Inc (NYSE:DKS) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 4 bullish hedge fund positions. Jabil Inc. (NYSE:JBL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JBL is 68.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on JBL as the stock returned 24.1% since the end of Q3 (through 12/18) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
