Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about The Buckle, Inc. (NYSE:BKE).
The Buckle, Inc. (NYSE:BKE) investors should be aware of a decrease in activity from the world's largest hedge funds lately. Our calculations also showed that BKE isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_193003" align="aligncenter" width="450"] Chuck Royce of Royce & Associates[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. 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. We also rely on the best performing hedge funds' buy/sell signals. Let's analyze the latest hedge fund action encompassing The Buckle, Inc. (NYSE:BKE).
How are hedge funds trading The Buckle, Inc. (NYSE:BKE)?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in BKE a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of The Buckle, Inc. (NYSE:BKE), with a stake worth $16 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $10.3 million. Sprott Asset Management, Royce & Associates, and D E Shaw 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 Sprott Asset Management allocated the biggest weight to The Buckle, Inc. (NYSE:BKE), around 1.16% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.15 percent of its 13F equity portfolio to BKE.
Because The Buckle, Inc. (NYSE:BKE) has witnessed falling interest from hedge fund managers, we can see that there were a few money managers that slashed their positions entirely by the end of the third quarter. At the top of the heap, Cliff Asness's AQR Capital Management dropped the biggest position of the 750 funds followed by Insider Monkey, valued at about $2.7 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund sold off about $0.9 million worth. These transactions are interesting, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as The Buckle, Inc. (NYSE:BKE) but similarly valued. We will take a look at Orthofix Medical Inc. (NASDAQ:OFIX), Tenneco Inc (NYSE:TEN), Brigham Minerals, Inc. (NYSE:MNRL), and PGT Innovations Inc. (NYSE:PGTI). This group of stocks' market values match BKE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OFIX,13,69122,0 TEN,13,130095,1 MNRL,14,75671,-1 PGTI,17,119291,-2 Average,14.25,98545,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $44 million in BKE's case. PGT Innovations Inc. (NYSE:PGTI) is the most popular stock in this table. On the other hand Orthofix Medical Inc. (NASDAQ:OFIX) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks The Buckle, Inc. (NYSE:BKE) is even less popular than OFIX. Hedge funds clearly dropped the ball on BKE as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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. A small number of hedge funds were also right about betting on BKE as the stock returned 36.8% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.