Hedge Funds Are Warming Up To Barnes & Noble Education Inc (BNED)

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Barnes & Noble Education Inc (NYSE:BNED).

Is Barnes & Noble Education Inc (NYSE:BNED) undervalued? The smart money is in a bullish mood. The number of bullish hedge fund positions increased by 5 recently. Our calculations also showed that BNED 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). BNED was in 14 hedge funds’ portfolios at the end of the first quarter of 2020. There were 9 hedge funds in our database with BNED positions at the end of the previous quarter.

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 best imported beer in 2020 to identify emerging trends that are likely to lead to 1000% gains in the coming years. 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. Now let’s review the key hedge fund action regarding Barnes & Noble Education Inc (NYSE:BNED).

Hedge fund activity in Barnes & Noble Education Inc (NYSE:BNED)

At Q1’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 56% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BNED over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Barnes & Noble Education Inc (NYSE:BNED) was held by Antara Capital, which reported holding $1.1 million worth of stock at the end of September. It was followed by Cloverdale Capital Management with a $1 million position. Other investors bullish on the company included Antara Capital, Arrowstreet Capital, and Royce & Associates. In terms of the portfolio weights assigned to each position Cloverdale Capital Management allocated the biggest weight to Barnes & Noble Education Inc (NYSE:BNED), around 0.78% of its 13F portfolio. Diametric Capital is also relatively very bullish on the stock, dishing out 0.19 percent of its 13F equity portfolio to BNED.

Consequently, key hedge funds have been driving this bullishness. Cloverdale Capital Management, managed by C. Jonathan Gattman, assembled the largest position in Barnes & Noble Education Inc (NYSE:BNED). Cloverdale Capital Management had $1 million invested in the company at the end of the quarter. Nick Thakore’s Diametric Capital also made a $0.2 million investment in the stock during the quarter. The following funds were also among the new BNED investors: Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, Israel Englander’s Millennium Management, and Renaissance Technologies.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Barnes & Noble Education Inc (NYSE:BNED) but similarly valued. These stocks are AIM ImmunoTech Inc. (NYSE:AIM), SMTC Corporation (NASDAQ:SMTX), China XD Plastics Co Ltd (NASDAQ:CXDC), and EDAP TMS S.A. (NASDAQ:EDAP). All of these stocks’ market caps match BNED’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AIM 2 825 0
SMTX 4 5840 -1
CXDC 2 614 1
EDAP 3 6182 -2
Average 2.75 3365 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.75 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $3 million in BNED’s case. SMTC Corporation (NASDAQ:SMTX) is the most popular stock in this table. On the other hand AIM ImmunoTech Inc. (NYSE:AIM) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Barnes & Noble Education Inc (NYSE:BNED) is more popular among hedge funds. 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately BNED wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on BNED were disappointed as the stock returned 15.4% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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