Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards Nordstrom, Inc. (NYSE:JWN) changed during the first quarter.
Nordstrom, Inc. (NYSE:JWN) was in 20 hedge funds’ portfolios at the end of September. JWN has seen a decrease in hedge fund sentiment in recent months. There were 27 hedge funds in our database with JWN holdings at the end of the previous quarter. Our calculations also showed that JWN 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.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
Ray Dalio of Bridgewater Associates
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the key hedge fund action surrounding Nordstrom, Inc. (NYSE:JWN).
What have hedge funds been doing with Nordstrom, Inc. (NYSE:JWN)?
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JWN over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Bridgewater Associates, managed by Ray Dalio, holds the most valuable position in Nordstrom, Inc. (NYSE:JWN). Bridgewater Associates has a $34.7 million position in the stock, comprising 0.3% of its 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, managed by Cliff Asness, which holds a $29.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Ken Griffin’s Citadel Investment Group, John W. Rogers’s Ariel Investments and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Stamos Capital allocated the biggest weight to Nordstrom, Inc. (NYSE:JWN), around 3.98% of its 13F portfolio. Pacifica Capital Investments is also relatively very bullish on the stock, earmarking 1.91 percent of its 13F equity portfolio to JWN.
Seeing as Nordstrom, Inc. (NYSE:JWN) has witnessed a decline in interest from the smart money, we can see that there was a specific group of money managers that elected to cut their full holdings last quarter. It’s worth mentioning that Renaissance Technologies said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, worth an estimated $32.7 million in call options. Seth Wunder’s fund, Black-and-White Capital, also cut its call options, about $9.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 7 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Nordstrom, Inc. (NYSE:JWN) but similarly valued. These stocks are ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Kemper Corporation (NYSE:KMPR), Manhattan Associates, Inc. (NASDAQ:MANH), and Berry Global Group Inc (NYSE:BERY). This group of stocks’ market valuations match JWN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ACAD | 26 | 1910582 | 5 |
| KMPR | 19 | 154935 | 0 |
| MANH | 22 | 440000 | 5 |
| BERY | 39 | 1571093 | -1 |
| Average | 26.5 | 1019153 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $1019 million. That figure was $178 million in JWN’s case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 19 bullish hedge fund positions. Nordstrom, Inc. (NYSE:JWN) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on JWN as the stock returned 14.5% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
