Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
New Jersey Resources Corp (NYSE:NJR) was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. NJR investors should be aware of an increase in hedge fund sentiment lately. There were 6 hedge funds in our database with NJR positions at the end of the previous quarter. At the end of this article we will also compare NJR to other stocks including Seritage Growth Properties (NYSE:SRG), The Wendy’s Company (NASDAQ:WEN), and Eldorado Gold Corp (USA) (NYSE:EGO) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, we’re going to review the latest action encompassing New Jersey Resources Corp (NYSE:NJR).
What does the smart money think about New Jersey Resources Corp (NYSE:NJR)?
Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a jump of 67% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards NJR over the last 5 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 publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Phill Gross and Robert Atchinson of Adage Capital Management holds the number one position in New Jersey Resources Corp (NYSE:NJR). According to regulatory filings, the fund has a $46 million position in the stock. On Adage Capital Management’s heels is Millennium Management, one of the 10 largest hedge funds in the world, which holds a $30.2 million position. Remaining peers that hold long positions include Cliff Asness’ AQR Capital Management, Ken Griffin’s Citadel Investment Group and Mark Coe’s Coe Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As aggregate interest increased, some big names have jumped into New Jersey Resources Corp (NYSE:NJR) headfirst. Citadel Investment Group established the biggest position in New Jersey Resources and reportedly had $3.1 million invested in the company at the end of the quarter. Coe Capital Management also initiated a $2.4 million position during the quarter. The following funds were also among the new NJR investors: Jonathan Barrett and Paul Segal’s Luminus Management and Jim Simons’ Renaissance Technologies.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as New Jersey Resources Corp (NYSE:NJR) but similarly valued. We will take a look at Seritage Growth Properties (NYSE:SRG), The Wendy’s Company (NASDAQ:WEN), Eldorado Gold Corp (USA) (NYSE:EGO), and MB Financial, Inc. (NASDAQ:MBFI). This group of stocks’ market values are similar to NJR’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SRG | 21 | 372324 | -1 |
| WEN | 18 | 908931 | -1 |
| EGO | 19 | 111699 | 0 |
| MBFI | 11 | 102815 | 0 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $374 million. That figure was $88 million in NJR’s case. Seritage Growth Properties (NYSE:SRG) is the most popular stock in this table. On the other hand MB Financial, Inc. (NASDAQ:MBFI) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks New Jersey Resources Corp (NYSE:NJR) is even less popular than MBFI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
