Is The TJX Companies (TJX) A Good Stock To Buy Now?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about The TJX Companies, Inc. (NYSE:TJX).

The TJX Companies, Inc. (NYSE:TJX) was in 78 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 72. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. TJX shareholders have witnessed an increase in support from the world’s most elite money managers of late. There were 72 hedge funds in our database with TJX positions at the end of the second quarter. Our calculations also showed that TJX 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).

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 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.

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind let’s take a look at the latest hedge fund action surrounding The TJX Companies, Inc. (NYSE:TJX).

How are hedge funds trading The TJX Companies, Inc. (NYSE:TJX)?

At the end of September, a total of 78 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TJX over the last 21 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, BlueSpruce Investments, managed by Tim Hurd and Ed Magnus, holds the number one position in The TJX Companies, Inc. (NYSE:TJX). BlueSpruce Investments has a $437.4 million position in the stock, comprising 10.3% of its 13F portfolio. Coming in second is Ric Dillon of Diamond Hill Capital, with a $308.2 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions contain Panayotis Takis Sparaggis’s Alkeon Capital Management, Gabriel Plotkin’s Melvin Capital Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Broad Bay Capital allocated the biggest weight to The TJX Companies, Inc. (NYSE:TJX), around 11.83% of its 13F portfolio. BlueSpruce Investments is also relatively very bullish on the stock, designating 10.28 percent of its 13F equity portfolio to TJX.

As one would reasonably expect, key hedge funds have jumped into The TJX Companies, Inc. (NYSE:TJX) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, created the most valuable position in The TJX Companies, Inc. (NYSE:TJX). Melvin Capital Management had $256 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also made a $97.4 million investment in the stock during the quarter. The other funds with brand new TJX positions are Dmitry Balyasny’s Balyasny Asset Management, Steve Cohen’s Point72 Asset Management, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as The TJX Companies, Inc. (NYSE:TJX) but similarly valued. We will take a look at Dominion Energy Inc. (NYSE:D), Colgate-Palmolive Company (NYSE:CL), FedEx Corporation (NYSE:FDX), Air Products & Chemicals, Inc. (NYSE:APD), Duke Energy Corporation (NYSE:DUK), Uber Technologies, Inc. (NYSE:UBER), and The Sherwin-Williams Company (NYSE:SHW). This group of stocks’ market values are closest to TJX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
D 37 967030 4
CL 47 1540716 -3
FDX 71 2579950 25
APD 49 745333 12
DUK 36 756631 3
UBER 100 5978770 6
SHW 55 1779583 2
Average 56.4 2049716 7

View table here if you experience formatting issues.

As you can see these stocks had an average of 56.4 hedge funds with bullish positions and the average amount invested in these stocks was $2050 million. That figure was $2853 million in TJX’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand Duke Energy Corporation (NYSE:DUK) is the least popular one with only 36 bullish hedge fund positions. The TJX Companies, Inc. (NYSE:TJX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TJX is 72.8. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on TJX as the stock returned 13.6% since the end of Q3 (through 11/27) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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