Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) investors should pay attention to an increase in hedge fund interest in recent months. Our calculations also showed that FLWS isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's take a look at the recent hedge fund action encompassing 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS).
What does smart money think about 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS)?
Heading into the third quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in FLWS a year ago. With hedge funds' capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) was held by AQR Capital Management, which reported holding $14.1 million worth of stock at the end of March. It was followed by GAMCO Investors with a $11.8 million position. Other investors bullish on the company included Millennium Management, GLG Partners, and Arrowstreet Capital.
Consequently, specific money managers have jumped into 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most valuable position in 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS). Balyasny Asset Management had $1.8 million invested in the company at the end of the quarter. Brian C. Freckmann's Lyon Street Capital also initiated a $1 million position during the quarter. The other funds with brand new FLWS positions are Hoon Kim's Quantinno Capital, Mike Vranos's Ellington, and Michael Gelband's ExodusPoint Capital.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) but similarly valued. These stocks are Sleep Number Corporation (NASDAQ:SNBR), Kearny Financial Corp. (NASDAQ:KRNY), Amerisafe, Inc. (NASDAQ:AMSF), and Oxford Industries, Inc. (NYSE:OXM). This group of stocks' market values resemble FLWS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNBR,16,114555,-4 KRNY,13,139904,-3 AMSF,12,28328,0 OXM,13,93351,2 Average,13.5,94035,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $86 million in FLWS's case. Sleep Number Corporation (NASDAQ:SNBR) is the most popular stock in this table. On the other hand Amerisafe, Inc. (NASDAQ:AMSF) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately FLWS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FLWS were disappointed as the stock returned -21.6% during the third quarter 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 many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.