We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is New Jersey Resources Corp (NYSE:NJR) a buy, sell, or hold? Money managers are in an optimistic mood. The number of bullish hedge fund bets improved by 2 in recent months. Our calculations also showed that NJR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). NJR was in 14 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with NJR holdings at the end of the previous quarter.
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 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.
Cliff Asness of AQR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the new hedge fund action regarding New Jersey Resources Corp (NYSE:NJR).
How have hedgies been trading New Jersey Resources Corp (NYSE:NJR)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in NJR over the last 17 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in New Jersey Resources Corp (NYSE:NJR), which was worth $39.6 million at the end of the third quarter. On the second spot was ExodusPoint Capital which amassed $11.7 million worth of shares. Millennium Management, Point72 Asset Management, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position ExodusPoint Capital allocated the biggest weight to New Jersey Resources Corp (NYSE:NJR), around 0.41% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.11 percent of its 13F equity portfolio to NJR.
Now, key hedge funds were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, established the biggest position in New Jersey Resources Corp (NYSE:NJR). ExodusPoint Capital had $11.7 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also made a $2 million investment in the stock during the quarter. The other funds with brand new NJR positions are Paul Tudor Jones’s Tudor Investment Corp, Donald Sussman’s Paloma Partners, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s go over hedge fund activity in other stocks similar to New Jersey Resources Corp (NYSE:NJR). We will take a look at Insperity Inc (NYSE:NSP), National Fuel Gas Company (NYSE:NFG), Healthequity Inc (NASDAQ:HQY), and Carter’s, Inc. (NYSE:CRI). This group of stocks’ market caps are similar to NJR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NSP | 24 | 342641 | 0 |
| NFG | 20 | 211706 | -2 |
| HQY | 19 | 212797 | -4 |
| CRI | 22 | 205949 | -3 |
| Average | 21.25 | 243273 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $83 million in NJR’s case. Insperity Inc (NYSE:NSP) is the most popular stock in this table. On the other hand Healthequity Inc (NASDAQ:HQY) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks New Jersey Resources Corp (NYSE:NJR) is even less popular than HQY. Hedge funds dodged a bullet by taking a bearish stance towards NJR. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately NJR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NJR investors were disappointed as the stock returned -5.9% 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
