In this article we will take a look at whether hedge funds think J Alexander's Holdings Inc (NYSE:JAX) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is J Alexander's Holdings Inc (NYSE:JAX) worth your attention right now? Hedge funds are in a pessimistic mood. The number of bullish hedge fund positions retreated by 1 in recent months. Our calculations also showed that JAX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). JAX was in 9 hedge funds' portfolios at the end of the first quarter of 2020. There were 10 hedge funds in our database with JAX positions at the end of the previous quarter. 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 58 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_738761" align="aligncenter" width="400"] Fred DiSanto of Ancora Advisors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let's take a gander at the new hedge fund action regarding J Alexander's Holdings Inc (NYSE:JAX).
How are hedge funds trading J Alexander's Holdings Inc (NYSE:JAX)?
At the end of the first quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JAX over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in J Alexander's Holdings Inc (NYSE:JAX) was held by Ancora Advisors, which reported holding $4.3 million worth of stock at the end of September. It was followed by Marathon Partners with a $2.1 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and GLG Partners. In terms of the portfolio weights assigned to each position Marathon Partners allocated the biggest weight to J Alexander's Holdings Inc (NYSE:JAX), around 1.32% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, dishing out 0.2 percent of its 13F equity portfolio to JAX.
Seeing as J Alexander's Holdings Inc (NYSE:JAX) has witnessed declining sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of funds that decided to sell off their positions entirely heading into Q4. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $0.5 million in stock, and Thomas Bailard's Bailard Inc was right behind this move, as the fund dropped about $0.2 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as J Alexander's Holdings Inc (NYSE:JAX) but similarly valued. These stocks are Lee Enterprises, Incorporated (NYSE:LEE), Summit Midstream Partners LP (NYSE:SMLP), Four Seasons Education (Cayman) Inc. (NYSE:FEDU), and Nephros, Inc. (NASDAQ:NEPH). This group of stocks' market values are similar to JAX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LEE,13,10356,5 SMLP,1,17,-3 FEDU,4,1699,0 NEPH,5,23181,1 Average,5.75,8813,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $10 million in JAX's case. Lee Enterprises, Incorporated (NYSE:LEE) is the most popular stock in this table. On the other hand Summit Midstream Partners LP (NYSE:SMLP) is the least popular one with only 1 bullish hedge fund positions. J Alexander's Holdings Inc (NYSE:JAX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on JAX as the stock returned 38.6% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.