It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 12.1% in the first 5 months of this year (through May 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 18.7% during the same 5-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Best Buy Co., Inc. (NYSE:BBY).
Best Buy Co., Inc. (NYSE:BBY) was in 35 hedge funds’ portfolios at the end of the first quarter of 2019. BBY shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 23 hedge funds in our database with BBY holdings at the end of the previous quarter. Our calculations also showed that BBY isn’t among the 30 most popular stocks among hedge funds.
If you’d ask most investors, hedge funds are perceived as unimportant, old financial tools of the past. While there are over 8000 funds with their doors open today, Our researchers look at the moguls of this club, around 750 funds. It is estimated that this group of investors administer the lion’s share of all hedge funds’ total asset base, and by monitoring their finest stock picks, Insider Monkey has found several investment strategies that have historically surpassed the market. Insider Monkey’s flagship hedge fund strategy outperformed the S&P 500 index by around 5 percentage points per year since its inception in May 2014 through the end of May. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 30.9% since February 2017 (through May 30th) even though the market was up nearly 24% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 11.9% in less than a couple of weeks whereas our long picks outperformed the market by 2 percentage points in this volatile 2 week period.
We’re going to view the latest hedge fund action surrounding Best Buy Co., Inc. (NYSE:BBY).
What have hedge funds been doing with Best Buy Co., Inc. (NYSE:BBY)?
At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 52% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in BBY a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Best Buy Co., Inc. (NYSE:BBY), which was worth $242.4 million at the end of the first quarter. On the second spot was Renaissance Technologies which amassed $141.4 million worth of shares. Moreover, Citadel Investment Group, Millennium Management, and D E Shaw were also bullish on Best Buy Co., Inc. (NYSE:BBY), allocating a large percentage of their portfolios to this stock.
As one would reasonably expect, key money managers were breaking ground themselves. Holocene Advisors, managed by Brandon Haley, initiated the biggest position in Best Buy Co., Inc. (NYSE:BBY). Holocene Advisors had $81.2 million invested in the company at the end of the quarter. Lee Ainslie’s Maverick Capital also initiated a $20.7 million position during the quarter. The following funds were also among the new BBY investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Robert Pohly’s Samlyn Capital, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.
Let’s also examine hedge fund activity in other stocks similar to Best Buy Co., Inc. (NYSE:BBY). We will take a look at Essex Property Trust Inc (NYSE:ESS), AMETEK, Inc. (NYSE:AME), Harris Corporation (NYSE:HRS), and American Water Works Company, Inc. (NYSE:AWK). All of these 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|
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $720 million. That figure was $1130 million in BBY’s case. AMETEK, Inc. (NYSE:AME) is the most popular stock in this table. On the other hand Essex Property Trust Inc (NYSE:ESS) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Best Buy Co., Inc. (NYSE:BBY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 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% 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.