Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of JAKKS Pacific, Inc. (NASDAQ:JAKK).
JAKKS Pacific, Inc. (NASDAQ:JAKK) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of September. At the end of this article we will also compare JAKK to other stocks including Flexible Solutions International, Inc. (NYSE:FSI), Wilhelmina International, Inc. (NASDAQ:WHLM), and Neovasc Inc. (NASDAQ:NVCN) to get a better sense of its popularity.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to view the new hedge fund action regarding JAKKS Pacific, Inc. (NASDAQ:JAKK).
What have hedge funds been doing with JAKKS Pacific, Inc. (NASDAQ:JAKK)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2019. By comparison, 8 hedge funds held shares or bullish call options in JAKK a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the number one position in JAKKS Pacific, Inc. (NASDAQ:JAKK). Renaissance Technologies has a $1.8 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Oasis Management, managed by Seth Fischer, which holds a $0.9 million position; 0.6% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish comprise John Overdeck and David Siegel’s Two Sigma Advisors, Paul Tudor Jones’s Tudor Investment Corp and . In terms of the portfolio weights assigned to each position Oasis Management allocated the biggest weight to JAKKS Pacific, Inc. (NASDAQ:JAKK), around 0.6% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0015 percent of its 13F equity portfolio to JAKK.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as JAKKS Pacific, Inc. (NASDAQ:JAKK) but similarly valued. We will take a look at Flexible Solutions International, Inc. (NYSE:FSI), Wilhelmina International, Inc. (NASDAQ:WHLM), Neovasc Inc. (NASDAQ:NVCN), and CPI Card Group Inc. (NASDAQ:PMTS). This group of stocks’ market valuations are similar to JAKK’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 1.75 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $3 million in JAKK’s case. CPI Card Group Inc. (NASDAQ:PMTS) is the most popular stock in this table. On the other hand Flexible Solutions International, Inc. (NYSE:FSI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks JAKKS Pacific, Inc. (NASDAQ:JAKK) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on JAKK as the stock returned 17.4% during the first two months of Q4 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.
Disclosure: None. This article was originally published at Insider Monkey.