Hedge Funds Are Buying JAKKS Pacific, Inc. (JAKK)

The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at JAKKS Pacific, Inc. (NASDAQ:JAKK) from the perspective of those successful funds.

JAKKS Pacific, Inc. (NASDAQ:JAKK) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. JAKK was in 12 hedge funds’ portfolios at the end of the third quarter of 2016. There were 11 hedge funds in our database with JAKK holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as VirnetX Holding Corporation (NYSEAMEX:VHC), Townsquare Media Inc (NYSE:TSQ), and Global Medical REIT Inc (NYSE:GMRE) to gather more data points.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Now, let’s view the key action regarding JAKKS Pacific, Inc. (NASDAQ:JAKK).

How are hedge funds trading JAKKS Pacific, Inc. (NASDAQ:JAKK)?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JAKK over the last 5 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world has the most valuable position in JAKKS Pacific, Inc. (NASDAQ:JAKK), worth close to $14.1 million, corresponding to less than 0.1% of its total 13F portfolio. The second largest stake is held by Oasis Managementá, led by Seth Fischer, which holds a $10.3 million position; 4.2% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish include Eric Edidin and Josh Lobel’s Archer Capital Management, and Cliff Asness’s AQR Capital Management. We should note that Archer Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Algert Coldiron Investors, led by Peter Algert and Kevin Coldiron, initiated the largest position in JAKKS Pacific, Inc. (NASDAQ:JAKK). Algert Coldiron Investors had $2.3 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $0.1 million position during the quarter. The other funds with new positions in the stock are Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management..

Let’s go over hedge fund activity in other stocks similar to JAKKS Pacific, Inc. (NASDAQ:JAKK). We will take a look at VirnetX Holding Corporation (NYSEAMEX:VHC), Townsquare Media Inc (NYSE:TSQ), Global Medical REIT Inc (NYSE:GMRE), and TriplePoint Venture Growth BDC Corp (NYSE:TPVG). This group of stocks’ market values match JAKK’s market value.

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $34 million in JAKK’s case. Townsquare Media Inc (NYSE:TSQ) is the most popular stock in this table. On the other hand VirnetX Holding Corporation (NYSEAMEX:VHC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks JAKKS Pacific, Inc. (NASDAQ:JAKK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.