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 ALJ Regional Holdings, Inc. (NASDAQ:ALJJ).
ALJ Regional Holdings, Inc. (NASDAQ:ALJJ) shareholders have witnessed an increase in hedge fund sentiment lately. ALJJ was in 3 hedge funds' portfolios at the end of the third quarter of 2019. There were 2 hedge funds in our database with ALJJ positions at the end of the previous quarter. Our calculations also showed that ALJJ 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.
To most investors, hedge funds are perceived as underperforming, outdated investment tools of yesteryear. While there are greater than 8000 funds with their doors open at present, We hone in on the elite of this club, around 750 funds. It is estimated that this group of investors watch over the lion's share of the smart money's total capital, and by watching their finest investments, Insider Monkey has unsheathed several investment strategies that have historically defeated the market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_338410" align="alignnone" width="2480"] Jeffrey Bronchick of Cove Street Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius' weekly trade ideas. 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 already gained 20 percent. Now we're going to take a look at the key hedge fund action regarding ALJ Regional Holdings, Inc. (NASDAQ:ALJJ).
How have hedgies been trading ALJ Regional Holdings, Inc. (NASDAQ:ALJJ)?
Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from one quarter earlier. On the other hand, there were a total of 4 hedge funds with a bullish position in ALJJ 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.
More specifically, Cove Street Capital was the largest shareholder of ALJ Regional Holdings, Inc. (NASDAQ:ALJJ), with a stake worth $0.7 million reported as of the end of September. Trailing Cove Street Capital was Citadel Investment Group, which amassed a stake valued at $0.1 million. Millennium Management was 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 Cove Street Capital allocated the biggest weight to ALJ Regional Holdings, Inc. (NASDAQ:ALJJ), around 0.1% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, designating 0.0001 percent of its 13F equity portfolio to ALJJ.
Consequently, specific money managers have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, established the most valuable position in ALJ Regional Holdings, Inc. (NASDAQ:ALJJ). Citadel Investment Group had $0.1 million invested in the company at the end of the quarter.
Let's go over hedge fund activity in other stocks similar to ALJ Regional Holdings, Inc. (NASDAQ:ALJJ). These stocks are Luby's, Inc. (NYSE:LUB), Mereo BioPharma Group plc (NASDAQ:MREO), Gridsum Holding Inc. (NASDAQ:GSUM), and Full House Resorts, Inc. (NASDAQ:FLL). This group of stocks' market values are closest to ALJJ's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LUB,3,7318,-1 MREO,4,2778,0 GSUM,5,9525,1 FLL,6,7121,1 Average,4.5,6686,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $7 million. That figure was $1 million in ALJJ's case. Full House Resorts, Inc. (NASDAQ:FLL) is the most popular stock in this table. On the other hand Luby's, Inc. (NYSE:LUB) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks ALJ Regional Holdings, Inc. (NASDAQ:ALJJ) is even less popular than LUB. Hedge funds dodged a bullet by taking a bearish stance towards ALJJ. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ALJJ wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ALJJ investors were disappointed as the stock returned -7.9% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.