Did Hedge Funds Make The Right Call On JELD-WEN Holding, Inc. (JELD) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (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. In this article, we will take a closer look at hedge fund sentiment towards JELD-WEN Holding, Inc. (NYSE:JELD) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is JELD-WEN Holding, Inc. (NYSE:JELD) a buy right now? Investors who are in the know were in a bearish mood. The number of bullish hedge fund bets shrunk by 9 recently. Our calculations also showed that JELD isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). JELD was in 20 hedge funds’ portfolios at the end of March. There were 29 hedge funds in our database with JELD holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most traders, hedge funds are seen as slow, old investment tools of years past. While there are greater than 8000 funds in operation at present, We choose to focus on the masters of this group, approximately 850 funds. These money managers control the lion’s share of the smart money’s total asset base, and by following their matchless stock picks, Insider Monkey has identified many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Now let’s take a glance at the fresh hedge fund action regarding JELD-WEN Holding, Inc. (NYSE:JELD).

What have hedge funds been doing with JELD-WEN Holding, Inc. (NYSE:JELD)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in JELD over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).

Is JELD A Good Stock To Buy?

Among these funds, Pzena Investment Management held the most valuable stake in JELD-WEN Holding, Inc. (NYSE:JELD), which was worth $87.2 million at the end of the third quarter. On the second spot was Hound Partners which amassed $13 million worth of shares. Arrowstreet Capital, BeaconLight Capital, and Renaissance Technologies 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 BeaconLight Capital allocated the biggest weight to JELD-WEN Holding, Inc. (NYSE:JELD), around 2.43% of its 13F portfolio. Hound Partners is also relatively very bullish on the stock, earmarking 1.21 percent of its 13F equity portfolio to JELD.

Because JELD-WEN Holding, Inc. (NYSE:JELD) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few hedgies that slashed their entire stakes by the end of the first quarter. Intriguingly, Ken Grossman and Glen Schneider’s SG Capital Management sold off the largest investment of the 750 funds monitored by Insider Monkey, comprising close to $16.1 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $10.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 9 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as JELD-WEN Holding, Inc. (NYSE:JELD) but similarly valued. These stocks are Methode Electronics Inc. (NYSE:MEI), Meritor Inc (NYSE:MTOR), CSW Industrials, Inc. (NASDAQ:CSWI), and Kronos Worldwide, Inc. (NYSE:KRO). This group of stocks’ market valuations are similar to JELD’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MEI 13 71718 -1
MTOR 17 166288 -12
CSWI 16 32007 0
KRO 13 35959 0
Average 14.75 76493 -3.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $76 million. That figure was $144 million in JELD’s case. Meritor Inc (NYSE:MTOR) is the most popular stock in this table. On the other hand Methode Electronics Inc. (NYSE:MEI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks JELD-WEN Holding, Inc. (NYSE:JELD) is more popular among hedge funds. 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 returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on JELD as the stock returned 98.3% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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