Were Hedge Funds Right About Piling Into The TJX Companies, Inc. (TJX)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to The TJX Companies, Inc. (NYSE:TJX) changed recently.

Is The TJX Companies, Inc. (NYSE:TJX) a safe investment right now? Money managers were becoming more confident. The number of bullish hedge fund positions increased by 3 lately. The TJX Companies, Inc. (NYSE:TJX) was in 72 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 69. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TJX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 69 hedge funds in our database with TJX positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most market participants, hedge funds are assumed to be worthless, old investment tools of the past. While there are more than 8000 funds with their doors open at present, We look at the elite of this club, about 850 funds. It is estimated that this group of investors orchestrate most of the hedge fund industry’s total asset base, and by shadowing their best stock picks, Insider Monkey has found several investment strategies that have historically outperformed the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding The TJX Companies, Inc. (NYSE:TJX).

What does smart money think about The TJX Companies, Inc. (NYSE:TJX)?

At Q2’s end, a total of 72 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 50 hedge funds with a bullish position in TJX a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Among these funds, Diamond Hill Capital held the most valuable stake in The TJX Companies, Inc. (NYSE:TJX), which was worth $286.3 million at the end of the third quarter. On the second spot was BlueSpruce Investments which amassed $274.4 million worth of shares. D E Shaw, Alkeon Capital Management, and Holocene Advisors 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 Broad Bay Capital allocated the biggest weight to The TJX Companies, Inc. (NYSE:TJX), around 8.25% of its 13F portfolio. Stormborn Capital Management is also relatively very bullish on the stock, dishing out 8.15 percent of its 13F equity portfolio to TJX.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Viking Global, managed by Andreas Halvorsen, assembled the largest position in The TJX Companies, Inc. (NYSE:TJX). Viking Global had $76.9 million invested in the company at the end of the quarter. John Murphy’s Levin Easterly Partners also initiated a $54.3 million position during the quarter. The following funds were also among the new TJX investors: Richard Scott Greeder’s Broad Bay Capital, Alok Agrawal’s Bloom Tree Partners, and Anand Parekh’s Alyeska Investment Group.

Let’s check out hedge fund activity in other stocks similar to The TJX Companies, Inc. (NYSE:TJX). We will take a look at Target Corporation (NYSE:TGT), General Electric Company (NYSE:GE), NetEase, Inc (NASDAQ:NTES), Duke Energy Corporation (NYSE:DUK), Activision Blizzard, Inc. (NASDAQ:ATVI), CME Group Inc (NASDAQ:CME), and Micron Technology, Inc. (NASDAQ:MU). This group of stocks’ market valuations are similar to TJX’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 60.4 hedge funds with bullish positions and the average amount invested in these stocks was $3148 million. That figure was $2348 million in TJX’s case. Activision Blizzard, Inc. (NASDAQ:ATVI) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 33 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 68.5. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and beat the market by 19.7 percentage points. Unfortunately TJX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on TJX were disappointed as the stock returned 12% since the end of June (through 10/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.