Is BBY A Good Stock To Buy Now?

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Best Buy Co., Inc. (NYSE:BBY).

Is BBY a good stock to buy now? Best Buy Co., Inc. (NYSE:BBY) was in 40 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. BBY shareholders have witnessed an increase in enthusiasm from smart money of late. There were 33 hedge funds in our database with BBY positions at the end of the second quarter. Our calculations also showed that BBY 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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. Now we’re going to analyze the recent hedge fund action surrounding Best Buy Co., Inc. (NYSE:BBY).

Do Hedge Funds Think BBY Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards BBY over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Best Buy Co., Inc. (NYSE:BBY) was held by AQR Capital Management, which reported holding $440.8 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $202.6 million position. Other investors bullish on the company included Citadel Investment Group, GLG Partners, and Alyeska Investment Group. In terms of the portfolio weights assigned to each position MIK Capital allocated the biggest weight to Best Buy Co., Inc. (NYSE:BBY), around 4.72% of its 13F portfolio. Capital Growth Management is also relatively very bullish on the stock, setting aside 2.21 percent of its 13F equity portfolio to BBY.

Consequently, key hedge funds were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, established the largest position in Best Buy Co., Inc. (NYSE:BBY). Holocene Advisors had $55 million invested in the company at the end of the quarter. Joe DiMenna’s ZWEIG DIMENNA PARTNERS also made a $23.9 million investment in the stock during the quarter. The following funds were also among the new BBY investors: Alexander Mitchell’s Scopus Asset Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Best Buy Co., Inc. (NYSE:BBY) but similarly valued. We will take a look at Match Group, Inc. (NASDAQ:MTCH), Paychex, Inc. (NASDAQ:PAYX), Peloton Interactive, Inc. (NASDAQ:PTON), Eversource Energy (NYSE:ES), CRH PLC (NYSE:CRH), Zimmer Biomet Holdings Inc (NYSE:ZBH), and Chunghwa Telecom Co., Ltd (NYSE:CHT). This group of stocks’ market caps are similar to BBY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MTCH 61 2846837 22
PAYX 28 724599 -8
PTON 58 3497757 8
ES 20 308177 -8
CRH 7 61870 0
ZBH 55 1130301 -7
CHT 5 149365 1
Average 33.4 1245558 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1246 million. That figure was $1195 million in BBY’s case. Match Group, Inc. (NASDAQ:MTCH) is the most popular stock in this table. On the other hand Chunghwa Telecom Co., Ltd (NYSE:CHT) is the least popular one with only 5 bullish hedge fund positions. Best Buy Co., Inc. (NYSE:BBY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BBY is 71.3. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and beat the market again by 15.8 percentage points. Unfortunately BBY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on BBY were disappointed as the stock returned -8.5% since the end of September (through 12/14) 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 many of these stocks already outperformed the market so far this year.

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