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Is New Jersey Resources Corp (NJR) Going To Burn These Hedge Funds?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first half of 2019. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards New Jersey Resources Corp (NYSE:NJR) to find out whether it was one of their high conviction long-term ideas.

New Jersey Resources Corp (NYSE:NJR) was in 12 hedge funds’ portfolios at the end of June. NJR investors should be aware of an increase in hedge fund sentiment lately. There were 11 hedge funds in our database with NJR holdings at the end of the previous quarter. Our calculations also showed that NJR isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

NJR_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the key hedge fund action surrounding New Jersey Resources Corp (NYSE:NJR).

Hedge fund activity in New Jersey Resources Corp (NYSE:NJR)

Heading into the third quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NJR over the last 16 quarters. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Steven Cohen, Point72 Asset Management

More specifically, Renaissance Technologies was the largest shareholder of New Jersey Resources Corp (NYSE:NJR), with a stake worth $48 million reported as of the end of March. Trailing Renaissance Technologies was GLG Partners, which amassed a stake valued at $18.1 million. AQR Capital Management, PDT Partners, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Perella Weinberg Partners, established the largest position in New Jersey Resources Corp (NYSE:NJR). Perella Weinberg Partners had $0.5 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new NJR position is Claes Fornell’s CSat Investment Advisory.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as New Jersey Resources Corp (NYSE:NJR) but similarly valued. These stocks are Generac Holdings Inc. (NYSE:GNRC), Pinnacle Financial Partners, Inc. (NASDAQ:PNFP), Tetra Tech, Inc. (NASDAQ:TTEK), and Littelfuse, Inc. (NASDAQ:LFUS). This group of stocks’ market values match NJR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNRC 25 229086 8
PNFP 18 78507 3
TTEK 22 101584 -1
LFUS 15 268202 2
Average 20 169345 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $78 million in NJR’s case. Generac Holdings Inc. (NYSE:GNRC) is the most popular stock in this table. On the other hand Littelfuse, Inc. (NASDAQ:LFUS) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks New Jersey Resources Corp (NYSE:NJR) is even less popular than LFUS. Hedge funds dodged a bullet by taking a bearish stance towards NJR. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately NJR wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); NJR investors were disappointed as the stock returned -8.5% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

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