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In this article we are going to use hedge fund sentiment as a tool and determine whether Burlington Stores Inc (NYSE:BURL) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Burlington Stores Inc (NYSE:BURL) a buy, sell, or hold? Investors who are in the know were becoming hopeful. The number of bullish hedge fund positions moved up by 11 lately. Burlington Stores Inc (NYSE:BURL) was in 43 hedge funds' portfolios at the end of June. The all time high for this statistic was previously 40. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BURL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 32 hedge funds in our database with BURL positions at the end of the first quarter.
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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Dan Loeb of Third Point
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Do Hedge Funds Think BURL Is A Good Stock To Buy Now?
At Q2's end, a total of 43 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 34% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in BURL over the last 24 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Third Point was the largest shareholder of Burlington Stores Inc (NYSE:BURL), with a stake worth $476.5 million reported as of the end of June. Trailing Third Point was Alkeon Capital Management, which amassed a stake valued at $308.1 million. Adage Capital Management, Scopus Asset Management, and Armistice Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Kehrs Ridge Capital allocated the biggest weight to Burlington Stores Inc (NYSE:BURL), around 3.94% of its 13F portfolio. Dorsal Capital Management is also relatively very bullish on the stock, earmarking 2.93 percent of its 13F equity portfolio to BURL.
As one would reasonably expect, key money managers have jumped into Burlington Stores Inc (NYSE:BURL) headfirst. Armistice Capital, managed by Steven Boyd, initiated the largest position in Burlington Stores Inc (NYSE:BURL). Armistice Capital had $82.6 million invested in the company at the end of the quarter. Jack Woodruff's Candlestick Capital Management also made a $42 million investment in the stock during the quarter. The other funds with new positions in the stock are Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital, Simon Sadler's Segantii Capital, and Renaissance Technologies.
Let's now review hedge fund activity in other stocks similar to Burlington Stores Inc (NYSE:BURL). These stocks are Cheniere Energy Partners LP (NYSE:CQP), Ventas, Inc. (NYSE:VTR), Expeditors International of Washington, Inc. (NASDAQ:EXPD), FleetCor Technologies, Inc. (NYSE:FLT), EXACT Sciences Corporation (NASDAQ:EXAS), Waters Corporation (NYSE:WAT), and Invitation Homes Inc. (NYSE:INVH). This group of stocks' market caps are closest to BURL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CQP,2,4279,0 VTR,25,562555,-2 EXPD,29,498402,8 FLT,40,1876911,1 EXAS,35,2373655,-6 WAT,40,2643422,6 INVH,33,1131870,5 Average,29.1,1298728,1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $1299 million. That figure was $1690 million in BURL's case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Burlington Stores Inc (NYSE:BURL) is more popular among hedge funds. Our overall hedge fund sentiment score for BURL is 90. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Unfortunately BURL wasn't nearly as popular as these 5 stocks and hedge funds that were betting on BURL were disappointed as the stock returned -11.5% since the end of the second quarter (through 10/1) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.