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

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about The TJX Companies, Inc. (NYSE:TJX)?

Is The TJX Companies, Inc. (NYSE:TJX) the right pick for your portfolio? The best stock pickers were getting less optimistic. The number of long hedge fund bets went down by 5 lately. The TJX Companies, Inc. (NYSE:TJX) was in 63 hedge funds’ portfolios at the end of the first quarter of 2021. 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 Q1 rankings). There were 68 hedge funds in our database with TJX holdings at the end of December.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Peter Rathjens of Arrowstreet Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a gander at the fresh hedge fund action surrounding The TJX Companies, Inc. (NYSE:TJX).

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

Heading into the second quarter of 2021, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. On the other hand, there were a total of 69 hedge funds with a bullish position in TJX a year ago. So, let’s check out 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, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the biggest position in The TJX Companies, Inc. (NYSE:TJX). Alkeon Capital Management has a $404.4 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund manager is Holocene Advisors, managed by Brandon Haley, which holds a $287 million position; the fund has 1.8% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include D. E. Shaw’s D E Shaw, Tim Hurd and Ed Magnus’s BlueSpruce Investments and John Overdeck and David Siegel’s Two Sigma Advisors. 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 12.82% of its 13F portfolio. Rip Road Capital is also relatively very bullish on the stock, designating 6.74 percent of its 13F equity portfolio to TJX.

Due to the fact that The TJX Companies, Inc. (NYSE:TJX) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that slashed their full holdings in the first quarter. Interestingly, Philippe Laffont’s Coatue Management cut the biggest position of the “upper crust” of funds monitored by Insider Monkey, totaling about $65.8 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also dumped its stock, about $53.8 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 5 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to The TJX Companies, Inc. (NYSE:TJX). These stocks are Snap Inc. (NYSE:SNAP), Prologis Inc (NYSE:PLD), Truist Financial Corporation (NYSE:TFC), The Bank of Nova Scotia (NYSE:BNS), China Petroleum & Chemical Corp (NYSE:SNP), FedEx Corporation (NYSE:FDX), and Zoetis Inc (NYSE:ZTS). This group of stocks’ market caps resemble TJX’s market cap.

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As you can see these stocks had an average of 42.7 hedge funds with bullish positions and the average amount invested in these stocks was $1683 million. That figure was $2348 million in TJX’s case. Snap Inc. (NYSE:SNAP) is the most popular stock in this table. On the other hand China Petroleum & Chemical Corp (NYSE:SNP) is the least popular one with only 11 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 66.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 25.8% in 2021 through August 6th and beat the market again by 6.7 percentage points. Unfortunately TJX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TJX were disappointed as the stock returned 5.2% since the end of March (through 8/6) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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