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Hedge Funds Are Dumping The TJX Companies, Inc. (TJX)

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of The TJX Companies, Inc. (NYSE:TJX).

Is The TJX Companies, Inc. (NYSE:TJX) a sound investment today? Money managers are turning less bullish. The number of bullish hedge fund positions were trimmed by 4 lately. Our calculations also showed that TJX isn’t among the 30 most popular stocks among hedge funds.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are a lot of gauges market participants employ to size up stocks. A couple of the most useful gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outpace their index-focused peers by a superb margin (see the details here).

CHILTON INVESTMENT COMPANY

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the fresh hedge fund action regarding The TJX Companies, Inc. (NYSE:TJX).

What have hedge funds been doing with The TJX Companies, Inc. (NYSE:TJX)?

Heading into the third quarter of 2019, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. On the other hand, there were a total of 39 hedge funds with a bullish position in TJX a year ago. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

TJX_oct2019

The largest stake in The TJX Companies, Inc. (NYSE:TJX) was held by Arrowstreet Capital, which reported holding $482.7 million worth of stock at the end of March. It was followed by Diamond Hill Capital with a $367.4 million position. Other investors bullish on the company included AQR Capital Management, D E Shaw, and Holocene Advisors.

Seeing as The TJX Companies, Inc. (NYSE:TJX) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of funds that slashed their full holdings by the end of the second quarter. At the top of the heap, Aaron Cowen’s Suvretta Capital Management cut the largest stake of the “upper crust” of funds watched by Insider Monkey, totaling about $73.5 million in stock. Alexander Mitchell’s fund, Scopus Asset Management, also said goodbye to its stock, about $22.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 4 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as The TJX Companies, Inc. (NYSE:TJX) but similarly valued. These stocks are Enterprise Products Partners L.P. (NYSE:EPD), CSX Corporation (NASDAQ:CSX), PNC Financial Services Group Inc. (NYSE:PNC), and Colgate-Palmolive Company (NYSE:CL). This group of stocks’ market caps match TJX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EPD 19 365269 -1
CSX 46 4858607 2
PNC 38 2671227 -2
CL 42 1858275 0
Average 36.25 2438345 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.25 hedge funds with bullish positions and the average amount invested in these stocks was $2438 million. That figure was $2308 million in TJX’s case. CSX Corporation (NYSE:CSX) is the most popular stock in this table. On the other hand Enterprise Products Partners L.P. (NYSE:EPD) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks The TJX Companies, Inc. (NYSE:TJX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on TJX as the stock returned 5.9% during Q3 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.

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

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