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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Barnes & Noble Education Inc (NYSE:BNED).
Is BNED a good stock to buy now? Money managers were selling. The number of long hedge fund positions were trimmed by 1 recently. Barnes & Noble Education Inc (NYSE:BNED) was in 11 hedge funds' portfolios at the end of September. The all time high for this statistics is 19. Our calculations also showed that BNED isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 12 hedge funds in our database with BNED holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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.
Peter Algert of Algert Global
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 we're going to take a peek at the latest hedge fund action encompassing Barnes & Noble Education Inc (NYSE:BNED).
Do Hedge Funds Think BNED Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in BNED a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Roumell Asset Management was the largest shareholder of Barnes & Noble Education Inc (NYSE:BNED), with a stake worth $6.5 million reported as of the end of September. Trailing Roumell Asset Management was Greenhaven Road Investment Management, which amassed a stake valued at $3.7 million. Antara Capital, Royce & Associates, and Millennium Management 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 Roumell Asset Management allocated the biggest weight to Barnes & Noble Education Inc (NYSE:BNED), around 12.82% of its 13F portfolio. Greenhaven Road Investment Management is also relatively very bullish on the stock, designating 1.43 percent of its 13F equity portfolio to BNED.
Because Barnes & Noble Education Inc (NYSE:BNED) has witnessed declining sentiment from hedge fund managers, logic holds that there is a sect of money managers who sold off their full holdings last quarter. It's worth mentioning that C. Jonathan Gattman's Cloverdale Capital Management cut the biggest investment of all the hedgies monitored by Insider Monkey, worth about $1.1 million in stock, and Cliff Asness's AQR Capital Management was right behind this move, as the fund cut about $0.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Barnes & Noble Education Inc (NYSE:BNED) but similarly valued. These stocks are Citizens Holding Company (NASDAQ:CIZN), Target Hospitality Corp. (NASDAQ:TH), Tyme Technologies, Inc. (NASDAQ:TYME), VivoPower International PLC (NASDAQ:VVPR), Global Ship Lease, Inc. (NYSE:GSL), Unity Bancorp, Inc. (NASDAQ:UNTY), and The Bank of Princeton (NASDAQ:BPRN). This group of stocks' market values resemble BNED's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CIZN,1,787,0 TH,13,8350,-2 TYME,3,4087,-3 VVPR,2,3202,1 GSL,3,13492,-1 UNTY,7,15357,2 BPRN,2,8608,0 Average,4.4,7698,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.4 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $13 million in BNED's case. Target Hospitality Corp. (NASDAQ:TH) is the most popular stock in this table. On the other hand Citizens Holding Company (NASDAQ:CIZN) is the least popular one with only 1 bullish hedge fund positions. Barnes & Noble Education Inc (NYSE:BNED) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BNED is 63. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on BNED as the stock returned 46.9% since the end of Q3 (through 12/8) 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.