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Should I Avoid Best Buy Co., Inc. (BBY)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Best Buy Co., Inc. (NYSE:BBY) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Best Buy Co., Inc. (NYSE:BBY) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Best Buy Co., Inc. (NYSE:BBY) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 40. There were 37 hedge funds in our database with BBY holdings at the end of March. Our calculations also showed that BBY isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

To most stock holders, hedge funds are perceived as worthless, old financial vehicles of the past. While there are more than 8000 funds with their doors open at present, Our experts choose to focus on the leaders of this club, approximately 850 funds. These money managers command the majority of the smart money’s total asset base, and by following their highest performing stock picks, Insider Monkey has brought to light numerous investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. Now let’s analyze the key hedge fund action regarding Best Buy Co., Inc. (NYSE:BBY).

What have hedge funds been doing with Best Buy Co., Inc. (NYSE:BBY)?

At second quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in BBY over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BBY A Good Stock To Buy?

The largest stake in Best Buy Co., Inc. (NYSE:BBY) was held by AQR Capital Management, which reported holding $406.5 million worth of stock at the end of September. It was followed by Two Sigma Advisors with a $134.3 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and GLG Partners. In terms of the portfolio weights assigned to each position MIK Capital allocated the biggest weight to Best Buy Co., Inc. (NYSE:BBY), around 3.08% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, designating 2.67 percent of its 13F equity portfolio to BBY.

Because Best Buy Co., Inc. (NYSE:BBY) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of fund managers that elected to cut their entire stakes in the second quarter. At the top of the heap, Alexander Mitchell’s Scopus Asset Management said goodbye to the largest stake of the “upper crust” of funds monitored by Insider Monkey, totaling about $10.6 million in stock, and Brad Stephens’s Six Columns Capital was right behind this move, as the fund sold off about $4.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds in the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Best Buy Co., Inc. (NYSE:BBY). We will take a look at State Street Corporation (NYSE:STT), BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Fortinet Inc (NASDAQ:FTNT), Archer Daniels Midland Company (NYSE:ADM), Palo Alto Networks Inc (NYSE:PANW), Genmab A/S (NASDAQ:GMAB), and Dollar Tree, Inc. (NASDAQ:DLTR). All of these stocks’ market caps resemble BBY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STT 36 668259 2
BMRN 45 2005739 -9
FTNT 44 1815016 15
ADM 28 606680 -4
PANW 51 3587653 4
GMAB 15 243405 1
DLTR 60 2268495 18
Average 39.9 1599321 3.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.9 hedge funds with bullish positions and the average amount invested in these stocks was $1599 million. That figure was $1063 million in BBY’s case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Genmab A/S (NASDAQ:GMAB) is the least popular one with only 15 bullish hedge fund positions. Best Buy Co., Inc. (NYSE:BBY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for BBY is 45.8. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. A small number of hedge funds were also right about betting on BBY as the stock returned 27.1% since the end of June and outperformed the market by an even larger margin.

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