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2019 Review: Top Hedge Fund Stocks vs. Burlington Stores Inc (BURL)

Reymerlyn Martin

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 Burlington Stores Inc (NYSE:BURL).

Is Burlington Stores Inc (NYSE:BURL) the right pick for your portfolio? Prominent investors are in a bullish mood. The number of long hedge fund positions increased by 6 recently. 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 at the end of this article for Q2 rankings).

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

[caption id="attachment_340081" align="aligncenter" width="600"] Phill Gross of Adage Capital Management[/caption]

We leave no stone unturned when looking for the next great investment idea. For example 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. 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 is still extremely cheap despite already gaining 20 percent. Now we're going to review the recent hedge fund action regarding Burlington Stores Inc (NYSE:BURL).

How are hedge funds trading Burlington Stores Inc (NYSE:BURL)?

At Q3's end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. On the other hand, there were a total of 35 hedge funds with a bullish position 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.

Among these funds, Adage Capital Management held the most valuable stake in Burlington Stores Inc (NYSE:BURL), which was worth $424.1 million at the end of the third quarter. On the second spot was Third Point which amassed $299.7 million worth of shares. Steadfast Capital Management, Citadel Investment Group, and Renaissance Technologies 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 Shellback Capital allocated the biggest weight to Burlington Stores Inc (NYSE:BURL), around 4.93% of its 13F portfolio. Thames Capital Management is also relatively very bullish on the stock, dishing out 3.61 percent of its 13F equity portfolio to BURL.

Consequently, some big names were leading the bulls' herd. Renaissance Technologies, founded by Jim Simons, established the most valuable 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 initiated a $10.9 million position during the quarter. The other funds with brand new BURL positions are 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 - not necessarily in the same industry as Burlington Stores Inc (NYSE:BURL) but similarly valued. These stocks are W.R. Berkley Corporation (NYSE:WRB), The Liberty SiriusXM Group (NASDAQ:LSXMA), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Universal Health Services, Inc. (NYSE:UHS). All of these stocks' market caps resemble BURL's market cap.

[table] 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 [/table]

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 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 BURL, though not to the same extent, as the stock returned 37.9% during 2019 (as of 12/23) and outperformed the market as well. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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