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Is BJ’s Wholesale Club Holdings, Inc. (BJ) Going to Burn These Hedge Funds?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) and determine whether hedge funds skillfully traded this stock.

Is BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) a buy here? Hedge funds were in an optimistic mood. The number of long hedge fund bets advanced by 5 recently. BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) was in 31 hedge funds’ portfolios at the end of June. The all time high for this statistics is 33. Our calculations also showed that BJ isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 26 hedge funds in our database with BJ holdings at the end of March.

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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind let’s take a look at the fresh hedge fund action encompassing BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ).

What does smart money think about BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ)?

At the end of the second quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in BJ a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) was held by Renaissance Technologies, which reported holding $43.7 million worth of stock at the end of September. It was followed by Millennium Management with a $41.6 million position. Other investors bullish on the company included Citadel Investment Group, DSAM Partners, and Marshall Wace LLP. In terms of the portfolio weights assigned to each position DSAM Partners allocated the biggest weight to BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ), around 5.06% of its 13F portfolio. Game Creek Capital is also relatively very bullish on the stock, setting aside 3.36 percent of its 13F equity portfolio to BJ.

As aggregate interest increased, specific money managers have jumped into BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) headfirst. Renaissance Technologies, established the most outsized position in BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). Renaissance Technologies had $43.7 million invested in the company at the end of the quarter. Guy Shahar’s DSAM Partners also initiated a $16.8 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman’s GLG Partners, David Harding’s Winton Capital Management, and Panayotis Takis Sparaggis’s Alkeon Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) but similarly valued. These stocks are Acceleron Pharma Inc (NASDAQ:XLRN), East West Bancorp, Inc. (NASDAQ:EWBC), Stericycle Inc (NASDAQ:SRCL), Sealed Air Corporation (NYSE:SEE), Flex Ltd. (NASDAQ:FLEX), Apache Corporation (NASDAQ:APA), and Hyatt Hotels Corporation (NYSE:H). This group of stocks’ market valuations are similar to BJ’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XLRN 48 803006 10
EWBC 23 224008 -2
SRCL 23 699844 3
SEE 28 812312 -1
FLEX 34 941645 10
APA 40 590803 5
H 27 468490 3
Average 31.9 648587 4

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $649 million. That figure was $246 million in BJ’s case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand East West Bancorp, Inc. (NASDAQ:EWBC) is the least popular one with only 23 bullish hedge fund positions. BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BJ is 54.2. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23.8% in 2020 through September 14th and beat the market by 17.6 percentage points. A small number of hedge funds were also right about betting on BJ, though not to the same extent, as the stock returned 10.1% during the first 2.5 months of Q3 and outperformed the market.

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