At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards J Alexander’s Holdings Inc (NYSE:JAX).
Is JAX a good stock to buy now? Prominent investors were taking a pessimistic view. The number of bullish hedge fund positions fell by 3 in recent months. J Alexander’s Holdings Inc (NYSE:JAX) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 18. Our calculations also showed that JAX 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). There were 13 hedge funds in our database with JAX positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 let’s view the recent hedge fund action encompassing J Alexander’s Holdings Inc (NYSE:JAX).
Do Hedge Funds Think JAX Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in JAX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Ancora Advisors held the most valuable stake in J Alexander’s Holdings Inc (NYSE:JAX), which was worth $5.9 million at the end of the third quarter. On the second spot was Hill Path Capital which amassed $2.6 million worth of shares. Renaissance Technologies, Marathon Partners, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Marathon Partners allocated the biggest weight to J Alexander’s Holdings Inc (NYSE:JAX), around 0.54% of its 13F portfolio. Hill Path Capital is also relatively very bullish on the stock, designating 0.43 percent of its 13F equity portfolio to JAX.
Judging by the fact that J Alexander’s Holdings Inc (NYSE:JAX) has experienced declining sentiment from the smart money, it’s easy to see that there were a few fund managers who sold off their positions entirely last quarter. Interestingly, Donald Sussman’s Paloma Partners dumped the biggest investment of all the hedgies tracked by Insider Monkey, totaling close to $0.2 million in stock, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund cut about $0.1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 3 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as J Alexander’s Holdings Inc (NYSE:JAX) but similarly valued. These stocks are OncoSec Medical Incorporated (NASDAQ:ONCS), Blue Ridge Bankshares, Inc. (NYSE:BRBS), Eyenovia, Inc. (NASDAQ:EYEN), NexPoint Real Estate Finance, Inc. (NYSE:NREF), China Customer Relations Centers, Inc. (NASDAQ:CCRC), electroCore, Inc. (NASDAQ:ECOR), and Farmer Brothers Co. (NASDAQ:FARM). All of these stocks’ market caps are closest to JAX’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 5 hedge funds with bullish positions and the average amount invested in these stocks was $5 million. That figure was $13 million in JAX’s case. Farmer Brothers Co. (NASDAQ:FARM) is the most popular stock in this table. On the other hand China Customer Relations Centers, Inc. (NASDAQ:CCRC) is the least popular one with only 1 bullish hedge fund positions. J Alexander’s Holdings Inc (NYSE:JAX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JAX is 56.2. 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 gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on JAX as the stock returned 43.5% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.