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Is BJ’s Restaurants, Inc. (BJRI) Going to Burn These Hedge Funds?

Nina Todic

It was a rough fourth quarter for many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 24.4% during the first 9 months of 2019 and outperformed the S&P 500 ETF by 4 percentage points. We are done processing the latest 13f filings and in this article we will study how hedge fund sentiment towards BJ's Restaurants, Inc. (NASDAQ:BJRI) changed during the first quarter.

BJ's Restaurants, Inc. (NASDAQ:BJRI) has experienced a decrease in activity from the world's largest hedge funds recently. BJRI was in 14 hedge funds' portfolios at the end of June. There were 19 hedge funds in our database with BJRI positions at the end of the previous quarter. Our calculations also showed that BJRI isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 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 40 percentage points since May 2014 through May 30, 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.

Paul Marshall Marshall Wace

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a peek at the new hedge fund action encompassing BJ's Restaurants, Inc. (NASDAQ:BJRI).

Hedge fund activity in BJ's Restaurants, Inc. (NASDAQ:BJRI)

At Q2's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -26% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BJRI over the last 16 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

No of Hedge Funds with BJRI Positions

The largest stake in BJ's Restaurants, Inc. (NASDAQ:BJRI) was held by Millennium Management, which reported holding $41.7 million worth of stock at the end of March. It was followed by Marshall Wace LLP with a $23.1 million position. Other investors bullish on the company included GLG Partners, Arrowstreet Capital, and Two Sigma Advisors.

Seeing as BJ's Restaurants, Inc. (NASDAQ:BJRI) has experienced a decline in interest from the entirety of the hedge funds we track, it's safe to say that there lies a certain "tier" of hedge funds who sold off their full holdings last quarter. It's worth mentioning that Ken Griffin's Citadel Investment Group dumped the largest stake of the 750 funds monitored by Insider Monkey, worth about $3.4 million in stock, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital was right behind this move, as the fund dropped about $1.2 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 5 funds last quarter.

Let's check out hedge fund activity in other stocks similar to BJ's Restaurants, Inc. (NASDAQ:BJRI). These stocks are Golden Ocean Group Limited (NASDAQ:GOGL), Douglas Dynamics Inc (NYSE:PLOW), Star Bulk Carriers Corp. (NASDAQ:SBLK), and TiVo Corporation (NASDAQ:TIVO). This group of stocks' market values resemble BJRI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GOGL,7,185539,-1 PLOW,7,9945,-4 SBLK,11,449409,-4 TIVO,19,109995,0 Average,11,188722,-2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $125 million in BJRI's case. TiVo Corporation (NASDAQ:TIVO) is the most popular stock in this table. On the other hand Golden Ocean Group Limited (NASDAQ:GOGL) is the least popular one with only 7 bullish hedge fund positions. BJ's Restaurants, Inc. (NASDAQ:BJRI) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately BJRI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BJRI were disappointed as the stock returned -11.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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

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