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Should You Follow the Smart Money to Barnes & Noble, Inc. (BKS)’s Exit?

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We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Barnes & Noble, Inc. (NYSE:BKS) , and what that likely means for the prospects of the company and its stock.

Barnes & Noble, Inc. (NYSE:BKS) shareholders have witnessed a decrease in support from the world’s most successful money managers recently. BKS was in 15 hedge funds’ portfolios at the end of the third quarter of 2016. There were 21 hedge funds in our database with BKS positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Cavco Industries, Inc. (NASDAQ:CVCO), 1st Source Corporation (NASDAQ:SRCE), and Finish Line Inc (NASDAQ:FINL) to gather more data points.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Raisa Kanareva/Shutterstock.com

Raisa Kanareva/Shutterstock.com

What does the smart money think about Barnes & Noble, Inc. (NYSE:BKS)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 29% drop from the previous quarter. Below, you can check out the change in hedge fund sentiment towards BKS over the last 5 quarters, which has generally trended down as booksellers continue to face digital pressure. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
BKS
When looking at the institutional investors followed by Insider Monkey, Abrams Capital Management, led by David Abrams, holds the largest position in Barnes & Noble, Inc. (NYSE:BKS). Abrams Capital Management has a $117.7 million position in the stock, comprising 5.8% of its 13F portfolio. On Abrams Capital Management’s heels is Renaissance Technologies, led by Jim Simons, which holds a $7.5 million position. Other members of the smart money that hold long positions consist of Jeffrey Gendell’s Tontine Asset Management, Brett Barakett’s Tremblant Capital, and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

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