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Hedge Funds Aren’t Crazy About South Jersey Industries Inc (SJI) Anymore

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtSouth Jersey Industries Inc (NYSE:SJI) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is South Jersey Industries Inc (NYSE:SJI) a buy here? The best stock pickers were getting less optimistic. The number of bullish hedge fund bets dropped by 5 in recent months. Our calculations also showed that SJI 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 9 states that banned plastic bags 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. Keeping this in mind let’s check out the fresh hedge fund action encompassing South Jersey Industries Inc (NYSE:SJI).

How are hedge funds trading South Jersey Industries Inc (NYSE:SJI)?

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SJI over the last 18 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, Diamond Hill Capital held the most valuable stake in South Jersey Industries Inc (NYSE:SJI), which was worth $53.2 million at the end of the third quarter. On the second spot was Millennium Management which amassed $10.6 million worth of shares. Citadel Investment Group, D E Shaw, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Diamond Hill Capital allocated the biggest weight to South Jersey Industries Inc (NYSE:SJI), around 0.36% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, dishing out 0.32 percent of its 13F equity portfolio to SJI.

Because South Jersey Industries Inc (NYSE:SJI) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there were a few money managers who sold off their positions entirely in the first quarter. It’s worth mentioning that David Harding’s Winton Capital Management dumped the biggest stake of the 750 funds followed by Insider Monkey, worth an estimated $5.6 million in stock. Brian Olson, Baehyun Sung, and Jamie Waters’s fund, Blackstart Capital, also dropped its stock, about $4.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 5 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to South Jersey Industries Inc (NYSE:SJI). We will take a look at Marriott Vacations Worldwide Corporation (NYSE:VAC), UFP Industries, Inc. (NASDAQ:UFPI), NCR Corporation (NYSE:NCR), and BlackBerry Limited (NYSE:BB). This group of stocks’ market caps are closest to SJI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VAC 25 299416 0
UFPI 17 67371 -10
NCR 32 155675 0
BB 22 280349 -5
Average 24 200703 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $201 million. That figure was $89 million in SJI’s case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand UFP Industries, Inc. (NASDAQ:UFPI) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks South Jersey Industries Inc (NYSE:SJI) is even less popular than UFPI. Hedge funds dodged a bullet by taking a bearish stance towards SJI. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market by 16.8 percentage points. Unfortunately SJI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); SJI investors were disappointed as the stock returned -3.6% 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 so far in 2020.

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