Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is J&J Snack Foods Corp. (NASDAQ:JJSF) going to take off soon? The smart money is turning bullish. The number of bullish hedge fund positions increased by 2 in recent months. 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 NRG Yield, Inc. Class C (NYSE:NYLD), Esterline Technologies Corporation (NYSE:ESL), and Parsley Energy Inc (NYSE:PE) to gather more data points.
According to most stock holders, hedge funds are seen as worthless, outdated investment tools of yesteryear. While there are more than 8000 funds trading at the moment, We choose to focus on the upper echelon of this group, approximately 700 funds. These money managers oversee most of the smart money’s total capital, and by following their unrivaled equity investments, Insider Monkey has identified several investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Keeping this in mind, let’s take a look at the latest action surrounding J&J Snack Foods Corp. (NASDAQ:JJSF).
What does the smart money think about J&J Snack Foods Corp. (NASDAQ:JJSF)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 29% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Renaissance Technologies has the most valuable position in J&J Snack Foods Corp. (NASDAQ:JJSF), worth close to $43.2 million, amounting to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Fisher Asset Management, led by Ken Fisher, holding a $6.6 million position; less than 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions consist of Mario Gabelli’s GAMCO Investors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Cliff Asness’ AQR Capital Management.
As aggregate interest increased, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the largest position in J&J Snack Foods Corp. (NASDAQ:JJSF). Millennium Management had $0.9 million invested in the company at the end of the quarter. Michael Platt and William Reeves’s BlueCrest Capital Mgmt. also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is Ken Griffin’s Citadel Investment Group.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as J&J Snack Foods Corp. (NASDAQ:JJSF) but similarly valued. These stocks are NRG Yield, Inc. Class C (NYSE:NYLD), Esterline Technologies Corporation (NYSE:ESL), Parsley Energy Inc (NYSE:PE), and Tri Pointe Homes Inc (NYSE:TPH). This group of stocks’ market valuations is similar to JJSF’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see, these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $391 million. That figure was $64 million in J&J Snack Foods Corp. (NASDAQ:JJSF)’s case. NRG Yield, Inc. Class C (NYSE:NYLD) is the most popular stock in this table. On the other hand, Tri Pointe Homes Inc (NYSE:TPH) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks, J&J Snack Foods Corp. (NASDAQ:JJSF) is even less popular than Tri Pointe Homes Inc (NYSE:TPH). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.