Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Bed Bath & Beyond Inc. (NASDAQ:BBBY) changed recently.
Is BBBY a good stock to buy? Bed Bath & Beyond Inc. (NASDAQ:BBBY) has seen a decrease in hedge fund sentiment of late. Bed Bath & Beyond Inc. (NASDAQ:BBBY) was in 32 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 34. Our calculations also showed that BBBY isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the 21st century investor’s toolkit there are a multitude of methods shareholders use to size up publicly traded companies. A couple of the most useful methods are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best money managers can outperform the market by a solid margin (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to review the new hedge fund action encompassing Bed Bath & Beyond Inc. (NASDAQ:BBBY).
Do Hedge Funds Think BBBY Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 27 hedge funds with a bullish position in BBBY a year ago. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in Bed Bath & Beyond Inc. (NASDAQ:BBBY) was held by Contrarius Investment Management, which reported holding $118 million worth of stock at the end of September. It was followed by Legion Partners Asset Management with a $85.9 million position. Other investors bullish on the company included D E Shaw, Arrowstreet Capital, and Masters Capital Management. In terms of the portfolio weights assigned to each position Legion Partners Asset Management allocated the biggest weight to Bed Bath & Beyond Inc. (NASDAQ:BBBY), around 20.55% of its 13F portfolio. Contrarius Investment Management is also relatively very bullish on the stock, setting aside 10.3 percent of its 13F equity portfolio to BBBY.
Due to the fact that Bed Bath & Beyond Inc. (NASDAQ:BBBY) has faced bearish sentiment from the smart money, it’s easy to see that there lies a certain “tier” of money managers that elected to cut their positions entirely by the end of the third quarter. At the top of the heap, James Parsons’s Junto Capital Management sold off the largest position of the “upper crust” of funds watched by Insider Monkey, valued at close to $22.7 million in stock, and Philippe Laffont’s Coatue Management was right behind this move, as the fund sold off about $19.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Bed Bath & Beyond Inc. (NASDAQ:BBBY). These stocks are Summit Materials Inc (NYSE:SUM), Shutterstock Inc (NYSE:SSTK), Bottomline Technologies (NASDAQ:EPAY), 21Vianet Group Inc (NASDAQ:VNET), Asbury Automotive Group, Inc. (NYSE:ABG), First Hawaiian, Inc. (NASDAQ:FHB), and Daqo New Energy Corp (NYSE:DQ). This group of stocks’ market values are closest to BBBY’s market value.
|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 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $499 million in BBBY’s case. Summit Materials Inc (NYSE:SUM) is the most popular stock in this table. On the other hand Daqo New Energy Corp (NYSE:DQ) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Bed Bath & Beyond Inc. (NASDAQ:BBBY) is more popular among hedge funds. Our overall hedge fund sentiment score for BBBY is 82.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on BBBY as the stock returned 25% since the end of September (through 12/18) 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.
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Disclosure: None. This article was originally published at Insider Monkey.