The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Big Lots, Inc. (NYSE:BIG) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Big Lots, Inc. (NYSE:BIG) has seen an increase in activity from the world's largest hedge funds recently. Big Lots, Inc. (NYSE:BIG) was in 22 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 26. There were 15 hedge funds in our database with BIG holdings at the end of March. Our calculations also showed that BIG isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). 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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now we're going to check out the new hedge fund action surrounding Big Lots, Inc. (NYSE:BIG).
Hedge fund activity in Big Lots, Inc. (NYSE:BIG)
At second quarter's end, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 47% from the first quarter of 2020. By comparison, 20 hedge funds held shares or bullish call options in BIG 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.
Of the funds tracked by Insider Monkey, Frederick DiSanto's Ancora Advisors has the biggest position in Big Lots, Inc. (NYSE:BIG), worth close to $109.7 million, accounting for 4.6% of its total 13F portfolio. On Ancora Advisors's heels is D E Shaw, led by D. E. Shaw, holding a $33.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Renaissance Technologies and John Overdeck and David Siegel's Two Sigma Advisors. In terms of the portfolio weights assigned to each position Ancora Advisors allocated the biggest weight to Big Lots, Inc. (NYSE:BIG), around 4.59% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.44 percent of its 13F equity portfolio to BIG.
As one would reasonably expect, key money managers have jumped into Big Lots, Inc. (NYSE:BIG) headfirst. D E Shaw, managed by D. E. Shaw, assembled the largest position in Big Lots, Inc. (NYSE:BIG). D E Shaw had $33.5 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $18.6 million position during the quarter. The other funds with brand new BIG positions are Richard Driehaus's Driehaus Capital, Israel Englander's Millennium Management, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Big Lots, Inc. (NYSE:BIG) but similarly valued. These stocks are Zymeworks Inc. (NYSE:ZYME), CareTrust REIT Inc (NASDAQ:CTRE), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Viper Energy Partners LP (NASDAQ:VNOM), Plains GP Holdings LP (NYSE:PAGP), Ameris Bancorp (NASDAQ:ABCB), and Innovative Industrial Properties, Inc. (NYSE:IIPR). This group of stocks' market values match BIG's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZYME,31,601363,4 CTRE,19,57146,12 IRWD,32,369498,4 VNOM,10,40175,-1 PAGP,19,109862,-3 ABCB,17,82148,4 IIPR,20,185487,6 Average,21.1,206526,3.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.1 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $248 million in BIG's case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand Viper Energy Partners LP (NASDAQ:VNOM) is the least popular one with only 10 bullish hedge fund positions. Big Lots, Inc. (NYSE:BIG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for BIG is 62.7. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately BIG wasn't nearly as popular as these 10 stocks and hedge funds that were betting on BIG were disappointed as the stock returned 6.9% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.