Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Big Lots, Inc. (BIG) Having A Big Day Following A Big Quarter

Big Lots, Inc. (NYSE:BIG) has surged by nearly 10% in trading this morning after posting better than expected first quarter financial results. The Ohio-based discount retailer reported EPS of $0.82, beating estimates of $0.70, while revenue increased by 2.5% year-over-year to $1.31 billion, narrowly topping estimates of $1.30 billion. Comparable-store sales increased by 3%, while profit rose by 20%. For the full 2016 year, the company is expecting EPS in the range of $3.35 to $3.50, topping the consensus of $3.30. Big Lots CEO, David Campisi, said that customers’ response to the company’s strategic focus on “ownable and winnable” merchandise categories was positive in the quarter.

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proven that they have great stock picking abilities. We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insight into how the brightest minds in the finance industry feel about specific stocks. After all, these people have access to smart analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Big Lots, Inc. (NYSE:BIG)? The smart money sentiment can provide an answer to this question.

Is Big Lots, Inc. (NYSE:BIG) undervalued? The smart money is in an optimistic mood. The number of long hedge fund bets increased by 1 in the first quarter. At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a 5% increase from one quarter earlier.  At the end of this article we will also compare BIG to other stocks including Lithia Motors Inc (NYSE:LAD), Kite Pharma Inc (NASDAQ:KITE), and Kosmos Energy Ltd (NYSE:KOS) to get a better sense of its popularity.

Follow Big Lots Inc (NYSE:BIG)
Trade (NYSE:BIG) Now!

When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in Big Lots, Inc. (NYSE:BIG). AQR Capital Management has a $80.4 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Gotham Asset Management, managed by Joel Greenblatt, which holds a $14.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Jim Simons’ Renaissance Technologies, Israel Englander’s Millennium Management, and John Tompkins’ Tyvor Capital.

On the next page we’ll look at some funds that took up positions in Big Lots during Q1, as well as compare the stock to a handful of others with similar market caps.

Consequently, specific money managers were breaking ground in BIG themselves. Hutchin Hill Capital, managed by Neil Chriss, initiated the most outsized position in Big Lots, Inc. (NYSE:BIG). Hutchin Hill Capital had $5.5 million invested in the company at the end of the quarter. Mike Vranos’ Ellington also initiated a $2.1 million position during the quarter. The only other fund with a brand new BIG position was Dmitry Balyasny’s Balyasny Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Big Lots, Inc. (NYSE:BIG) but similarly valued. We will take a look at Lithia Motors Inc (NYSE:LAD), Kite Pharma Inc (NASDAQ:KITE), Kosmos Energy Ltd (NYSE:KOS), and Snyder S Lance Inc (NASDAQ:LNCE). This group of stocks’ market caps are closest to BIG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LAD 28 155672 3
KITE 23 311900 -4
KOS 7 19932 -2
LNCE 15 251366 -3

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $185 million. That figure was $165 million in BIG’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand Kosmos Energy Ltd (NYSE:KOS) is the least popular one with only 7 bullish hedge fund positions. Big Lots, Inc. (NYSE:BIG) 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. In this regard LAD might be a better candidate to consider a long position.

Disclosure: None

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.