Is Bassett Furniture Industries Inc. (NASDAQ:BSET) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Bassett Furniture Industries Inc. (NASDAQ:BSET) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of the third quarter of 2019. At the end of this article we will also compare BSET to other stocks including Adaptimmune Therapeutics plc (NASDAQ:ADAP), Craft Brew Alliance Inc (NASDAQ:BREW), and Escalade, Inc. (NASDAQ:ESCA) to get a better sense of its popularity.
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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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the recent hedge fund action encompassing Bassett Furniture Industries Inc. (NASDAQ:BSET).
What does smart money think about Bassett Furniture Industries Inc. (NASDAQ:BSET)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 12 hedge funds held shares or bullish call options in BSET a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GAMCO Investors was the largest shareholder of Bassett Furniture Industries Inc. (NASDAQ:BSET), with a stake worth $13.4 million reported as of the end of September. Trailing GAMCO Investors was Renaissance Technologies, which amassed a stake valued at $11.9 million. Arrowstreet Capital, D E Shaw, and Two Sigma 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 GAMCO Investors allocated the biggest weight to Bassett Furniture Industries Inc. (NASDAQ:BSET), around 0.11% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to BSET.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Winton Capital Management).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Bassett Furniture Industries Inc. (NASDAQ:BSET) but similarly valued. We will take a look at Adaptimmune Therapeutics plc (NASDAQ:ADAP), Craft Brew Alliance Inc (NASDAQ:BREW), Escalade, Inc. (NASDAQ:ESCA), and FNCB Bancorp Inc. (NASDAQ:FNCB). All of these stocks’ market caps are closest to BSET’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $29 million in BSET’s case. Craft Brew Alliance Inc (NASDAQ:BREW) is the most popular stock in this table. On the other hand Escalade, Inc. (NASDAQ:ESCA) is the least popular one with only 3 bullish hedge fund positions. Bassett Furniture Industries Inc. (NASDAQ:BSET) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately BSET wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BSET were disappointed as the stock returned 0.3% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.