It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2018) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Bojangles' Inc (NASDAQ:BOJA).
If you'd ask most market participants, hedge funds are viewed as slow, outdated financial vehicles of yesteryear. While there are greater than 8,000 funds with their doors open at present, We hone in on the leaders of this club, around 700 funds. Most estimates calculate that this group of people shepherd most of the hedge fund industry's total asset base, and by keeping an eye on their finest equity investments, Insider Monkey has deciphered a few investment strategies that have historically outrun Mr. Market. Insider Monkey's flagship hedge fund strategy outpaced the S&P 500 index by 6 percentage points annually since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.
We're going to take a look at the latest hedge fund action surrounding Bojangles' Inc (NASDAQ:BOJA).
How are hedge funds trading Bojangles' Inc (NASDAQ:BOJA)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 56% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in BOJA heading into this year. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Bojangles' Inc (NASDAQ:BOJA), with a stake worth $6.7 million reported as of the end of September. Trailing Millennium Management was Marshall Wace LLP, which amassed a stake valued at $3.4 million. Two Sigma Advisors, Renaissance Technologies, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the largest position in Bojangles' Inc (NASDAQ:BOJA). Marshall Wace LLP had $3.4 million invested in the company at the end of the quarter. Matthew Hulsizer's PEAK6 Capital Management also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Ben Gambill's Tiger Eye Capital, Alec Litowitz and Ross Laser's Magnetar Capital, and Jeffrey Talpins's Element Capital Management.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Bojangles' Inc (NASDAQ:BOJA) but similarly valued. These stocks are tronc, Inc. (NYSE:TRNC), Adams Natural Resources Fund, Inc. (NYSE:PEO), Veritiv Corp (NYSE:VRTV), and Lantheus Holdings Inc (NASDAQ:LNTH). This group of stocks' market valuations resemble BOJA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRNC,14,28434,4 PEO,2,1551,0 VRTV,13,166645,8 LNTH,16,64553,-1 Average,11.25,65296,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $21 million in BOJA's case. Lantheus Holdings Inc (NASDAQ:LNTH) is the most popular stock in this table. On the other hand Adams Natural Resources Fund, Inc. (NYSE:PEO) is the least popular one with only 2 bullish hedge fund positions. Bojangles' Inc (NASDAQ:BOJA) 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. In this regard LNTH might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.