Is Bed Bath & Beyond Inc. (NASDAQ:BBBY) undervalued? The smart money is getting less optimistic. The number of long hedge fund positions were trimmed by 3 recently.
According to most stock holders, hedge funds are viewed as slow, outdated investment vehicles of the past. While there are greater than 8000 funds with their doors open at the moment, we look at the bigwigs of this club, about 450 funds. It is estimated that this group controls the majority of all hedge funds’ total capital, and by paying attention to their top investments, we have identified a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Equally as key, positive insider trading activity is another way to break down the stock market universe. Just as you’d expect, there are a variety of incentives for a bullish insider to get rid of shares of his or her company, but just one, very simple reason why they would buy. Plenty of academic studies have demonstrated the valuable potential of this method if piggybackers understand what to do (learn more here).
Now, it’s important to take a gander at the latest action encompassing Bed Bath & Beyond Inc. (NASDAQ:BBBY).
How have hedgies been trading Bed Bath & Beyond Inc. (NASDAQ:BBBY)?
At year’s end, a total of 30 of the hedge funds we track were bullish in this stock, a change of -9% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings substantially.
When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the biggest position in Bed Bath & Beyond Inc. (NASDAQ:BBBY), worth close to $105 million, comprising 0.3% of its total 13F portfolio. Coming in second is Jeffrey Gates of Gates Capital Management, with a $73 million position; the fund has 4.5% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include John Osterweis’s Osterweis Capital Management, and Phill Gross and Robert Atchinson’s Adage Capital Management.
Judging by the fact that Bed Bath & Beyond Inc. (NASDAQ:BBBY) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of fund managers that slashed their positions entirely heading into 2013. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group sold off the largest investment of the “upper crust” of funds we track, totaling close to $45 million in stock., and Jacob Doft of Highline Capital Management was right behind this move, as the fund cut about $32 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds heading into 2013.
What have insiders been doing with Bed Bath & Beyond Inc. (NASDAQ:BBBY)?
Insider buying is particularly usable when the company in focus has seen transactions within the past half-year. Over the last six-month time frame, Bed Bath & Beyond Inc. (NASDAQ:BBBY) has seen zero unique insiders buying, and 4 insider sales (see the details of insider trades here).
With the results demonstrated by our research, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Bed Bath & Beyond Inc. (NASDAQ:BBBY) shareholders fit into this picture quite nicely.
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