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We at Insider Monkey have gone over 887 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Best Buy Co., Inc. (NYSE:BBY) based on that data.
Is BBY stock a buy or sell? Best Buy Co., Inc. (NYSE:BBY) has seen a decrease in enthusiasm from smart money lately. Best Buy Co., Inc. (NYSE:BBY) was in 38 hedge funds' portfolios at the end of December. The all time high for this statistic is 40. There were 40 hedge funds in our database with BBY positions at the end of the third quarter. Our calculations also showed that BBY isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Michael Gelband of ExodusPoint Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's take a look at the new hedge fund action encompassing Best Buy Co., Inc. (NYSE:BBY).
Do Hedge Funds Think BBY Is A Good Stock To Buy Now?
At the end of December, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in BBY a year ago. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Best Buy Co., Inc. (NYSE:BBY) was held by AQR Capital Management, which reported holding $358.6 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $151.6 million position. Other investors bullish on the company included Coatue Management, Alyeska Investment Group, and D E Shaw. In terms of the portfolio weights assigned to each position L2 Asset Management allocated the biggest weight to Best Buy Co., Inc. (NYSE:BBY), around 1.6% of its 13F portfolio. Alyeska Investment Group is also relatively very bullish on the stock, dishing out 1.01 percent of its 13F equity portfolio to BBY.
Because Best Buy Co., Inc. (NYSE:BBY) has faced declining sentiment from hedge fund managers, we can see that there lies a certain "tier" of fund managers who sold off their positions entirely heading into Q1. At the top of the heap, Brandon Haley's Holocene Advisors sold off the largest investment of the 750 funds tracked by Insider Monkey, totaling close to $55 million in stock, and Phill Gross and Robert Atchinson's Adage Capital Management was right behind this move, as the fund sold off about $28.4 million worth. These moves are important to note, as total hedge fund interest was cut by 2 funds heading into Q1.
Let's check out hedge fund activity in other stocks similar to Best Buy Co., Inc. (NYSE:BBY). We will take a look at State Street Corporation (NYSE:STT), Delta Air Lines, Inc. (NYSE:DAL), Suncor Energy Inc. (NYSE:SU), TELUS Corporation (NYSE:TU), McCormick & Company, Incorporated (NYSE:MKC), The Clorox Company (NYSE:CLX), and Dollar Tree, Inc. (NASDAQ:DLTR). This group of stocks' market caps are similar to BBY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STT,31,502936,-3 DAL,58,1058704,15 SU,25,686120,3 TU,14,183122,2 MKC,36,1880232,-1 CLX,39,1653099,0 DLTR,53,1977339,3 Average,36.6,1134507,2.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1135 million. That figure was $975 million in BBY's case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand TELUS Corporation (NYSE:TU) is the least popular one with only 14 bullish hedge fund positions. Best Buy Co., Inc. (NYSE:BBY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BBY is 58.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on BBY as the stock returned 19.2% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.