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The TJX Companies, Inc. (TJX) vs. Hedge Fund Favorites in 2019

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 Total Return Index ETFs returned approximately 31% in 2019 (through December 23rd). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.1% during the same period, with the majority 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’ consensus 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 The TJX Companies, Inc. (NYSE:TJX).

The TJX Companies, Inc. (NYSE:TJX) has experienced a decrease in activity from the world’s largest hedge funds of late. TJX was in 48 hedge funds’ portfolios at the end of the third quarter of 2019. There were 50 hedge funds in our database with TJX holdings at the end of the previous 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 at the end of this article for Q2 rankings).

To most traders, hedge funds are seen as underperforming, outdated financial tools of years past. While there are greater than 8000 funds in operation today, Our experts hone in on the leaders of this club, around 750 funds. These money managers manage bulk of the smart money’s total capital, and by following their first-class investments, Insider Monkey has figured out a few investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a glance at the fresh 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 the third quarter, a total of 48 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the second quarter of 2019. By comparison, 49 hedge funds held shares or bullish call options in TJX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is TJX A Good Stock To Buy?

More specifically, Diamond Hill Capital was the largest shareholder of The TJX Companies, Inc. (NYSE:TJX), with a stake worth $380.3 million reported as of the end of September. Trailing Diamond Hill Capital was Arrowstreet Capital, which amassed a stake valued at $342.2 million. AQR Capital Management, D E Shaw, and BlueSpruce Investments were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position BlueSpruce Investments allocated the biggest weight to The TJX Companies, Inc. (NYSE:TJX), around 9.63% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, designating 2.02 percent of its 13F equity portfolio to TJX.

Because The TJX Companies, Inc. (NYSE:TJX) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedgies who sold off their full holdings last quarter. Intriguingly, Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the biggest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $80.2 million in stock, and Robert Pohly’s Samlyn Capital was right behind this move, as the fund cut about $61.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s go over 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 T-Mobile US, Inc. (NYSE:TMUS), Banco Santander, S.A. (NYSE:SAN), Mitsubishi UFJ Financial Group Inc (NYSE:MUFG), and Banco Bradesco SA (NYSE:BBD). All of these stocks’ market caps are closest to TJX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TMUS 60 1457333 -18
SAN 20 645984 -2
MUFG 10 60064 -2
BBD 16 595049 2
Average 26.5 689608 -5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $690 million. That figure was $1965 million in TJX’s case. T-Mobile US, Inc. (NYSE:TMUS) is the most popular stock in this table. On the other hand Mitsubishi UFJ Financial Group Inc (NYSE:MUFG) is the least popular one with only 10 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 calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on TJX, though not to the same extent, as the stock returned 36.4% during 2019 (as of 12/23) and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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