Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Johnson Outdoors Inc. (NASDAQ:JOUT).
Johnson Outdoors Inc. (NASDAQ:JOUT) investors should be aware of a decrease in hedge fund interest of late. JOUT was in 10 hedge funds’ portfolios at the end of June. There were 11 hedge funds in our database with JOUT positions at the end of the previous quarter. Our calculations also showed that JOUT isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the recent hedge fund action regarding Johnson Outdoors Inc. (NASDAQ:JOUT).
What does smart money think about Johnson Outdoors Inc. (NASDAQ:JOUT)?
At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in JOUT 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.
Among these funds, Renaissance Technologies held the most valuable stake in Johnson Outdoors Inc. (NASDAQ:JOUT), which was worth $27.7 million at the end of the second quarter. On the second spot was Royce & Associates which amassed $15.6 million worth of shares. Moreover, Millennium Management, AQR Capital Management, and Two Sigma Advisors were also bullish on Johnson Outdoors Inc. (NASDAQ:JOUT), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Johnson Outdoors Inc. (NASDAQ:JOUT) has witnessed declining sentiment from hedge fund managers, logic holds that there is a sect of hedge funds that decided to sell off their positions entirely heading into Q3. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest stake of the 750 funds watched by Insider Monkey, worth about $5 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund cut about $0.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Johnson Outdoors Inc. (NASDAQ:JOUT) but similarly valued. We will take a look at Grupo Supervielle S.A. (NYSE:SUPV), Celestica Inc. (NYSE:CLS), CorePoint Lodging Inc. (NYSE:CPLG), and Krystal Biotech, Inc. (NASDAQ:KRYS). This group of stocks’ market caps are closest to JOUT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SUPV | 7 | 35642 | -5 |
| CLS | 12 | 61125 | -3 |
| CPLG | 8 | 16070 | -5 |
| KRYS | 12 | 190349 | -4 |
| Average | 9.75 | 75797 | -4.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $61 million in JOUT’s case. Celestica Inc. (NYSE:CLS) is the most popular stock in this table. On the other hand Grupo Supervielle S.A. (NYSE:SUPV) is the least popular one with only 7 bullish hedge fund positions. Johnson Outdoors Inc. (NASDAQ:JOUT) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately JOUT wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on JOUT were disappointed as the stock returned -21.3% during the third quarter 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.
