Were Hedge Funds Right About Fleeing Burlington Stores Inc (BURL)?

Is Burlington Stores Inc (NYSE:BURL) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Burlington Stores Inc (NYSE:BURL) a healthy stock for your portfolio? The smart money is becoming less hopeful. The number of bullish hedge fund bets dropped by 5 in recent months. Our calculations also showed that BURL isn’t among the 30 most popular stocks among hedge funds.

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Let’s check out the new hedge fund action regarding Burlington Stores Inc (NYSE:BURL).

What have hedge funds been doing with Burlington Stores Inc (NYSE:BURL)?

At Q4’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the second quarter of 2018. By comparison, 33 hedge funds held shares or bullish call options in BURL 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.


More specifically, Adage Capital Management was the largest shareholder of Burlington Stores Inc (NYSE:BURL), with a stake worth $279.4 million reported as of the end of September. Trailing Adage Capital Management was Point72 Asset Management, which amassed a stake valued at $74.1 million. D E Shaw, Samlyn Capital, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.

Since Burlington Stores Inc (NYSE:BURL) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few fund managers who were dropping their positions entirely heading into Q3. Interestingly, Jim Simons’s Renaissance Technologies dumped the largest stake of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $62.5 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund sold off about $51.3 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 5 funds heading into Q3.

Let’s check out hedge fund activity in other stocks similar to Burlington Stores Inc (NYSE:BURL). We will take a look at Lincoln National Corporation (NYSE:LNC), Kohl’s Corporation (NYSE:KSS), Cboe Global Markets, Inc. (NASDAQ:CBOE), and UDR, Inc. (NYSE:UDR). This group of stocks’ market values match BURL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LNC 33 575085 0
KSS 27 1031858 -2
CBOE 24 815080 3
UDR 20 669432 4
Average 26 772864 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $773 million. That figure was $855 million in BURL’s case. Lincoln National Corporation (NYSE:LNC) is the most popular stock in this table. On the other hand UDR, Inc. (NYSE:UDR) is the least popular one with only 20 bullish hedge fund positions. Burlington Stores Inc (NYSE:BURL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately BURL wasn’t in this group. Hedge funds that bet on BURL were disappointed as the stock lost 14% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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