We at Insider Monkey have gone over 738 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article, we look at what those funds think of BlueLinx Holdings Inc. (NYSE:BXC) based on that data.
Hedge fund interest in BlueLinx Holdings Inc. (NYSE:BXC) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Cutera, Inc. (NASDAQ:CUTR), BayCom Corp (NASDAQ:BCML), and Aclaris Therapeutics, Inc. (NASDAQ:ACRS) to gather more data points.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a glance at the key hedge fund action surrounding BlueLinx Holdings Inc. (NYSE:BXC).
What have hedge funds been doing with BlueLinx Holdings Inc. (NYSE:BXC)?
Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2018. On the other hand, there were a total of 13 hedge funds with a bullish position in BXC a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
Among these funds, Nokomis Capital held the most valuable stake in BlueLinx Holdings Inc. (NYSE:BXC), which was worth $32.1 million at the end of the first quarter. On the second spot was Adage Capital Management which amassed $22.7 million worth of shares. Moreover, Tontine Asset Management, Coliseum Capital, and Venator Capital Management were also bullish on BlueLinx Holdings Inc. (NYSE:BXC), allocating a large percentage of their portfolios to this stock.
Since BlueLinx Holdings Inc. (NYSE:BXC) has witnessed falling interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds who sold off their full holdings last quarter. At the top of the heap, Jim Simons’s Renaissance Technologies dropped the largest position of all the hedgies monitored by Insider Monkey, comprising about $1.2 million in stock, and Jeffrey Pierce’s Snow Park Capital Partners was right behind this move, as the fund said goodbye to about $1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks similar to BlueLinx Holdings Inc. (NYSE:BXC). We will take a look at Cutera, Inc. (NASDAQ:CUTR), BayCom Corp (NASDAQ:BCML), Aclaris Therapeutics, Inc. (NASDAQ:ACRS), and Willis Lease Finance Corporation (NASDAQ:WLFC). This group of stocks’ market valuations match BXC’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $83 million in BXC’s case. Aclaris Therapeutics, Inc. (NASDAQ:ACRS) is the most popular stock in this table. On the other hand Willis Lease Finance Corporation (NASDAQ:WLFC) is the least popular one with only 2 bullish hedge fund positions. BlueLinx Holdings Inc. (NYSE:BXC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately BXC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BXC were disappointed as the stock returned -18.8% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.