Was The Smart Money Right About The TJX Companies (TJX)?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on The TJX Companies, Inc. (NYSE:TJX).

Is The TJX Companies, Inc. (NYSE:TJX) a buy here? Investors who are in the know were turning less bullish. The number of bullish hedge fund positions were trimmed by 10 in recent months. The TJX Companies, Inc. (NYSE:TJX) was in 68 hedge funds’ portfolios at the end of December. The all time high for this statistic is 78. Our calculations also showed that TJX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 78 hedge funds in our database with TJX holdings at the end of September.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. Now let’s go over the fresh hedge fund action regarding The TJX Companies, Inc. (NYSE:TJX).

Do Hedge Funds Think TJX Is A Good Stock To Buy Now?

At fourth quarter’s end, a total of 68 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the third quarter of 2020. By comparison, 57 hedge funds held shares or bullish call options in TJX a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Panayotis Takis Sparaggis’s Alkeon Capital Management has the largest position in The TJX Companies, Inc. (NYSE:TJX), worth close to $416.5 million, comprising 0.7% of its total 13F portfolio. Coming in second is Diamond Hill Capital, led by Ric Dillon, holding a $367.2 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Tim Hurd and Ed Magnus’s BlueSpruce Investments, D. E. Shaw’s D E Shaw and Richard Scott Greeder’s Broad Bay Capital. In terms of the portfolio weights assigned to each position Broad Bay Capital allocated the biggest weight to The TJX Companies, Inc. (NYSE:TJX), around 13.51% of its 13F portfolio. Rip Road Capital is also relatively very bullish on the stock, setting aside 7.13 percent of its 13F equity portfolio to TJX.

Due to the fact that The TJX Companies, Inc. (NYSE:TJX) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of money managers that slashed their entire stakes heading into Q1. Interestingly, Gabriel Plotkin’s Melvin Capital Management dumped the biggest position of the 750 funds tracked by Insider Monkey, valued at close to $256 million in stock. Aaron Cowen’s fund, Suvretta Capital Management, also dropped its stock, about $49.7 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 10 funds heading into Q1.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as The TJX Companies, Inc. (NYSE:TJX) but similarly valued. These stocks are Anthem Inc (NYSE:ANTM), Snowflake Inc (NYSE:SNOW), S&P Global Inc. (NYSE:SPGI), Applied Materials, Inc. (NASDAQ:AMAT), Zoetis Inc (NYSE:ZTS), Canadian National Railway Company (NYSE:CNI), and Altria Group Inc (NYSE:MO). This group of stocks’ market values are similar to TJX’s market value.

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As you can see these stocks had an average of 55.6 hedge funds with bullish positions and the average amount invested in these stocks was $3716 million. That figure was $2297 million in TJX’s case. S&P Global Inc. (NYSE:SPGI) is the most popular stock in this table. On the other hand Canadian National Railway Company (NYSE:CNI) is the least popular one with only 31 bullish hedge fund positions. The TJX Companies, Inc. (NYSE:TJX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TJX is 63.2. 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. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately TJX wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on TJX were disappointed as the stock returned 1.4% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.