What Do Hedge Funds Think of Big Lots, Inc. (BIG)?

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Big Lots, Inc. (NYSE:BIG), and what that likely means for the prospects of the company and its stock.

Is Big Lots, Inc. (NYSE:BIG) a healthy stock for your portfolio? Prominent investors are reducing their bets on the stock. The number of long hedge fund positions went down by 6 in recent months. At the end of this article we will also compare BIG to other stocks including CLARCOR Inc. (NYSE:CLC), Prestige Brands Holdings, Inc. (NYSE:PBH), and Snyder S Lance Inc (NASDAQ:LNCE) to get a better sense of its popularity.

In the eyes of most investors, hedge funds are viewed as underperforming, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers choose to focus on the upper echelon of this club, approximately 700 funds. These money managers watch over the lion’s share of the hedge fund industry’s total asset base, and by observing their first-class equity investments, Insider Monkey has found many investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, let’s take a glance at the latest action surrounding Big Lots, Inc. (NYSE:BIG).

How have hedgies been trading Big Lots, Inc. (NYSE:BIG)?

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the number one position in Big Lots, Inc. (NYSE:BIG), worth close to $68.5 million, accounting for 0.1% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, managed by Cliff Asness, which holds a $67.4 million position; 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish comprise Joel Greenblatt’s Gotham Asset Management, Jim Simons’s Renaissance Technologies and Peter Muller’s PDT Partners.

Judging by the fact that Big Lots, Inc. (NYSE:BIG) has experienced declining sentiment from the smart money, we can see that there was a specific group of fund managers who were dropping their entire stakes in the third quarter. Intriguingly, John Tompkins’s Tyvor Capital dumped the biggest investment of all the hedgies monitored by Insider Monkey, totaling close to $14.1 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund said goodbye to about $7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 6 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Big Lots, Inc. (NYSE:BIG) but similarly valued. These stocks are CLARCOR Inc. (NYSE:CLC), Prestige Brands Holdings, Inc. (NYSE:PBH), Snyder S Lance Inc (NASDAQ:LNCE), and ONE Gas Inc (NYSE:OGS). This group of stocks’ market values are closest to BIG’s market value.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $255 million in BIG’s case. CLARCOR Inc. (NYSE:CLC) is the most popular stock in this table. On the other hand Prestige Brands Holdings, Inc. (NYSE:PBH) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Big Lots, Inc. (NYSE:BIG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.