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Were Hedge Funds Right About Piling Into Burlington Stores Inc (BURL) in September?

Is Burlington Stores Inc (NYSE:BURL) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Burlington Stores Inc (NYSE:BURL) ready to rally soon? The best stock pickers are buying. The number of long hedge fund bets rose by 6 in recent months. Our calculations also showed that BURL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). BURL was in 37 hedge funds’ portfolios at the end of the third quarter of 2019. There were 31 hedge funds in our database with BURL holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

Phill Gross of Adage Capital Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s review the new hedge fund action regarding Burlington Stores Inc (NYSE:BURL).

What does smart money think about Burlington Stores Inc (NYSE:BURL)?

At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BURL over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

BURL_dec2019

Of the funds tracked by Insider Monkey, Adage Capital Management, managed by Phill Gross and Robert Atchinson, holds the biggest position in Burlington Stores Inc (NYSE:BURL). Adage Capital Management has a $424.1 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Third Point, led by Dan Loeb, holding a $299.7 million position; the fund has 3.6% of its 13F portfolio invested in the stock. Other professional money managers that are bullish encompass Robert Pitts’s Steadfast Capital Management, Ken Griffin’s Citadel Investment Group and Renaissance Technologies. In terms of the portfolio weights assigned to each position Shellback Capital allocated the biggest weight to Burlington Stores Inc (NYSE:BURL), around 4.93% of its portfolio. Thames Capital Management is also relatively very bullish on the stock, earmarking 3.61 percent of its 13F equity portfolio to BURL.

Consequently, key hedge funds were breaking ground themselves. Renaissance Technologies created the largest position in Burlington Stores Inc (NYSE:BURL). Renaissance Technologies had $94 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $10.9 million investment in the stock during the quarter. The following funds were also among the new BURL investors: Sander Gerber’s Hudson Bay Capital Management, Principal Global Investors’s Columbus Circle Investors, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.

Let’s go over hedge fund activity in other stocks similar to Burlington Stores Inc (NYSE:BURL). We will take a look at W.R. Berkley Corporation (NYSE:WRB), The Liberty SiriusXM Group (NASDAQ:LSXMA), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Universal Health Services, Inc. (NYSE:UHS). This group of stocks’ market values are closest to BURL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WRB 21 337881 -2
LSXMA 39 1484908 5
CRWD 28 273644 -13
UHS 26 562518 2
Average 28.5 664738 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.5 hedge funds with bullish positions and the average amount invested in these stocks was $665 million. That figure was $1513 million in BURL’s case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand W.R. Berkley Corporation (NYSE:WRB) is the least popular one with only 21 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on BURL as the stock returned 12.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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