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Hedge Fund Darlings vs. Best Buy Co., Inc. (BBY) In 2019

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by almost 14 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Best Buy Co., Inc. (NYSE:BBY) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. BBY was in 27 hedge funds’ portfolios at the end of the third quarter of 2019. There were 31 hedge funds in our database with BBY holdings at the end of the previous quarter. Our calculations also showed that BBY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In today’s marketplace there are tons of metrics investors have at their disposal to evaluate stocks. A couple of the most underrated metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top investment managers can beat the S&P 500 by a healthy margin (see the details here).

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example 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. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let’s go over the fresh hedge fund action encompassing Best Buy Co., Inc. (NYSE:BBY).

What does smart money think about Best Buy Co., Inc. (NYSE:BBY)?

At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. On the other hand, there were a total of 27 hedge funds with a bullish position in BBY a year ago. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

More specifically, AQR Capital Management was the largest shareholder of Best Buy Co., Inc. (NYSE:BBY), with a stake worth $297.1 million reported as of the end of September. Trailing AQR Capital Management was Renaissance Technologies, which amassed a stake valued at $120.8 million. Two Sigma Advisors, Alyeska Investment Group, and Winton Capital Management 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 Buckingham Capital Management allocated the biggest weight to Best Buy Co., Inc. (NYSE:BBY), around 0.89% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, earmarking 0.84 percent of its 13F equity portfolio to BBY.

Seeing as Best Buy Co., Inc. (NYSE:BBY) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers who sold off their positions entirely in the third quarter. Intriguingly, Brandon Haley’s Holocene Advisors dropped the biggest position of all the hedgies followed by Insider Monkey, worth about $51.1 million in stock, and Ken Heebner’s Capital Growth Management was right behind this move, as the fund cut about $8 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 4 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Best Buy Co., Inc. (NYSE:BBY). These stocks are CMS Energy Corporation (NYSE:CMS), Lennar Corporation (NYSE:LEN), KeyCorp (NYSE:KEY), and Centene Corporation (NYSE:CNC). This group of stocks’ market caps match BBY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CMS 26 942764 4
LEN 57 1988724 4
KEY 28 671066 -3
CNC 55 2034586 -10
Average 41.5 1409285 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.5 hedge funds with bullish positions and the average amount invested in these stocks was $1409 million. That figure was $628 million in BBY’s case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand CMS Energy Corporation (NYSE:CMS) is the least popular one with only 26 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. A small number of hedge funds were also right about betting on BBY as the stock returned 70.2% in 2019 through December 23rd and outperformed the market by an even larger margin.
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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