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Best Buy Co., Inc. (BBY): Were Hedge Funds Right About This Stock?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is Best Buy Co., Inc. (NYSE:BBY) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Best Buy Co., Inc. (NYSE:BBY) has experienced a decrease in support from the world’s most elite money managers lately. Our calculations also showed that BBY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

We leave no stone unturned when looking for the next great investment idea. For example, COVID-19 pandemic is still the main driver of stock prices. So we are checking out this trader’s corona catalyst trades. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the fresh hedge fund action regarding Best Buy Co., Inc. (NYSE:BBY).

How have hedgies been trading Best Buy Co., Inc. (NYSE:BBY)?

Heading into the first quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the third quarter of 2019. By comparison, 23 hedge funds held shares or bullish call options in BBY a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in Best Buy Co., Inc. (NYSE:BBY), which was worth $264.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $146.7 million worth of shares. Two Sigma Advisors, Alyeska Investment Group, and GLG Partners 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 L2 Asset Management allocated the biggest weight to Best Buy Co., Inc. (NYSE:BBY), around 1.45% of its 13F portfolio. Alyeska Investment Group is also relatively very bullish on the stock, dishing out 0.7 percent of its 13F equity portfolio to BBY.

Since Best Buy Co., Inc. (NYSE:BBY) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few hedge funds that decided to sell off their positions entirely by the end of the third quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, valued at an estimated $12.9 million in stock, and David Keidan’s Buckingham Capital Management was right behind this move, as the fund dropped about $7 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Best Buy Co., Inc. (NYSE:BBY). These stocks are Palo Alto Networks Inc (NYSE:PANW), Verisign, Inc. (NASDAQ:VRSN), Liberty Broadband Corp (NASDAQ:LBRDA), and Fox Corporation (NASDAQ:FOX). This group of stocks’ market caps are closest to BBY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PANW 47 3168440 -5
VRSN 38 5872682 6
LBRDA 24 821139 0
FOX 27 935717 -2
Average 34 2699495 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $2699 million. That figure was $686 million in BBY’s case. Palo Alto Networks Inc (NYSE:PANW) is the most popular stock in this table. On the other hand Liberty Broadband Corp (NASDAQ:LBRDA) is the least popular one with only 24 bullish hedge fund positions. Best Buy Co., Inc. (NYSE:BBY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately BBY wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); BBY investors were disappointed as the stock returned -16.9% during the same time period 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 most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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