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Hedge Funds Are Dumping Johnson Outdoors Inc. (JOUT)

In this article you are going to find out whether hedge funds think Johnson Outdoors Inc. (NASDAQ:JOUT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Johnson Outdoors Inc. (NASDAQ:JOUT) worth your attention right now? Investors who are in the know are getting less bullish. The number of bullish hedge fund positions were trimmed by 6 lately. Our calculations also showed that JOUT 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).

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the latest hedge fund action surrounding Johnson Outdoors Inc. (NASDAQ:JOUT).

What have hedge funds been doing with Johnson Outdoors Inc. (NASDAQ:JOUT)?

At Q1’s end, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -43% from the previous quarter. On the other hand, there were a total of 11 hedge funds with a bullish position in JOUT a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Johnson Outdoors Inc. (NASDAQ:JOUT) was held by Royce & Associates, which reported holding $27.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $22.2 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Johnson Outdoors Inc. (NASDAQ:JOUT), around 0.51% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.38 percent of its 13F equity portfolio to JOUT.

Due to the fact that Johnson Outdoors Inc. (NASDAQ:JOUT) has witnessed bearish sentiment from the smart money, logic holds that there was a specific group of fund managers that elected to cut their full holdings heading into Q4. At the top of the heap, D. E. Shaw’s D E Shaw sold off the largest stake of all the hedgies followed by Insider Monkey, totaling about $1 million in stock. Donald Sussman’s fund, Paloma Partners, also dumped its stock, about $0.5 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 6 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Johnson Outdoors Inc. (NASDAQ:JOUT). We will take a look at Athenex, Inc. (NASDAQ:ATNX), Eventbrite, Inc. (NYSE:EB), Triumph Bancorp Inc (NASDAQ:TBK), and Eagle Pharmaceuticals Inc (NASDAQ:EGRX). This group of stocks’ market values resemble JOUT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATNX 15 196800 0
EB 25 134133 1
TBK 6 24013 -1
EGRX 15 108673 1
Average 15.25 115905 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $62 million in JOUT’s case. Eventbrite, Inc. (NYSE:EB) is the most popular stock in this table. On the other hand Triumph Bancorp Inc (NASDAQ:TBK) is the least popular one with only 6 bullish hedge fund positions. Johnson Outdoors Inc. (NASDAQ:JOUT) is not the least popular stock in this group but hedge fund interest is still below average. 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 gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on JOUT as the stock returned 32.3% during the second quarter and outperformed the market by an even larger margin.

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