Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell's pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards BG Staffing Inc (NYSE:BGSF).
BG Staffing Inc (NYSE:BGSF) investors should be aware of an increase in activity from the world's largest hedge funds lately. Our calculations also showed that BGSF 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_26255" align="aligncenter" width="600"] Louis Navellier of Navellier & Associates[/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 based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to analyze the key hedge fund action surrounding BG Staffing Inc (NYSE:BGSF).
How are hedge funds trading BG Staffing Inc (NYSE:BGSF)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in BGSF over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the biggest position in BG Staffing Inc (NYSE:BGSF). AQR Capital Management has a $3.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Navellier & Associates, led by Louis Navellier, holding a $1.7 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism consist of Bernard Horn's Polaris Capital Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to BG Staffing Inc (NYSE:BGSF), around 0.28% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to BGSF.
As one would reasonably expect, specific money managers were leading the bulls' herd. Polaris Capital Management, managed by Bernard Horn, established the largest position in BG Staffing Inc (NYSE:BGSF). Polaris Capital Management had $1.1 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron's Algert Coldiron Investors also initiated a $0.2 million position during the quarter.
Let's also examine hedge fund activity in other stocks similar to BG Staffing Inc (NYSE:BGSF). We will take a look at First Guaranty Bancshares, Inc. (NASDAQ:FGBI), First Capital, Inc. (NASDAQ:FCAP), Navios Maritime Partners L.P. (NYSE:NMM), and Capital Product Partners L.P. (NASDAQ:CPLP). This group of stocks' market valuations are closest to BGSF's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FGBI,1,783,0 FCAP,1,434,0 NMM,3,2294,2 CPLP,5,3768,0 Average,2.5,1820,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.5 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $9 million in BGSF's case. Capital Product Partners L.P. (NASDAQ:CPLP) is the most popular stock in this table. On the other hand First Guaranty Bancshares, Inc. (NASDAQ:FGBI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks BG Staffing Inc (NYSE:BGSF) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on BGSF as the stock returned 14.7% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.