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 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% 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 J&J Snack Foods Corp. (NASDAQ:JJSF).
Hedge fund interest in J&J Snack Foods Corp. (NASDAQ:JJSF) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare JJSF to other stocks including Stag Industrial Inc (NYSE:STAG), Energizer Holdings, Inc. (NYSE:ENR), and Science Applications International Corp (NYSE:SAIC) to get a better sense of its popularity.
If you’d ask most market participants, hedge funds are seen as underperforming, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open at present, Our experts hone in on the moguls of this club, about 750 funds. These money managers direct bulk of the hedge fund industry’s total asset base, and by tracking their top investments, Insider Monkey has formulated a number of investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship hedge fund strategy exceeded the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.
Let’s take a glance at the recent hedge fund action regarding J&J Snack Foods Corp. (NASDAQ:JJSF).
How have hedgies been trading J&J Snack Foods Corp. (NASDAQ:JJSF)?
At the end of the fourth quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in JJSF over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of J&J Snack Foods Corp. (NASDAQ:JJSF), with a stake worth $59.1 million reported as of the end of September. Trailing Renaissance Technologies was GAMCO Investors, which amassed a stake valued at $6.6 million. GLG Partners, Fisher Asset Management, and Holocene Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as J&J Snack Foods Corp. (NASDAQ:JJSF) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of money managers who were dropping their entire stakes last quarter. Intriguingly, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors said goodbye to the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $1.1 million in stock. Roger Ibbotson’s fund, Zebra Capital Management, also dumped its stock, about $0.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to J&J Snack Foods Corp. (NASDAQ:JJSF). These stocks are Stag Industrial Inc (NYSE:STAG), Energizer Holdings, Inc. (NYSE:ENR), Science Applications International Corp (NYSE:SAIC), and Old National Bancorp (NASDAQ:ONB). This group of stocks’ market valuations match JJSF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STAG | 12 | 115201 | 1 |
| ENR | 21 | 242691 | -5 |
| SAIC | 24 | 192455 | 0 |
| ONB | 7 | 29032 | 1 |
| Average | 16 | 144845 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $82 million in JJSF’s case. Science Applications International Corp (NYSE:SAIC) is the most popular stock in this table. On the other hand Old National Bancorp (NASDAQ:ONB) is the least popular one with only 7 bullish hedge fund positions. J&J Snack Foods Corp. (NASDAQ:JJSF) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately JJSF wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); JJSF investors were disappointed as the stock returned 7.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
