U.S. markets close in 2 hours 15 minutes

Hedge Funds Started Getting Back Into JAKKS Pacific, Inc. (JAKK) At The Right Time

Asma UL Husna

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of JAKKS Pacific, Inc. (NASDAQ:JAKK).

Is JAKKS Pacific, Inc. (NASDAQ:JAKK) worth your attention right now? The best stock pickers are in an optimistic mood. The number of bullish hedge fund positions improved by 1 lately. Our calculations also showed that JAKK 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). 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 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 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 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.

[caption id="attachment_694254" align="aligncenter" width="399"] Andrew Axelrod of Axar Capital[/caption]

Andrew Axelrod Axar Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a peek at the new hedge fund action regarding JAKKS Pacific, Inc. (NASDAQ:JAKK).

How are hedge funds trading JAKKS Pacific, Inc. (NASDAQ:JAKK)?

At the end of the first quarter, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in JAKK a year ago. With the smart money's capital changing hands, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

The largest stake in JAKKS Pacific, Inc. (NASDAQ:JAKK) was held by Renaissance Technologies, which reported holding $0.8 million worth of stock at the end of September. It was followed by Axar Capital with a $0.4 million position. Other investors bullish on the company included Oasis Management, Two Sigma Advisors, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position Axar Capital allocated the biggest weight to JAKKS Pacific, Inc. (NASDAQ:JAKK), around 0.74% of its 13F portfolio. Oasis Management is also relatively very bullish on the stock, setting aside 0.25 percent of its 13F equity portfolio to JAKK.

As industrywide interest jumped, key money managers were leading the bulls' herd. Citadel Investment Group, managed by Ken Griffin, assembled the most valuable position in JAKKS Pacific, Inc. (NASDAQ:JAKK). Citadel Investment Group had $0 million invested in the company at the end of the quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as JAKKS Pacific, Inc. (NASDAQ:JAKK) but similarly valued. These stocks are Aptevo Therapeutics Inc. (NASDAQ:APVO), Gevo, Inc. (NASDAQ:GEVO), Eastside Distilling, Inc. (NASDAQ:EAST), and SELLAS Life Sciences Group, Inc. (NASDAQ:SLS). All of these stocks' market caps resemble JAKK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APVO,2,1257,-4 GEVO,1,473,0 EAST,4,1035,0 SLS,2,67,1 Average,2.25,708,-0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 2.25 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $1 million in JAKK's case. Eastside Distilling, Inc. (NASDAQ:EAST) is the most popular stock in this table. On the other hand Gevo, Inc. (NASDAQ:GEVO) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks JAKKS Pacific, Inc. (NASDAQ:JAKK) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on JAKK as the stock returned 107.1% so far in Q2 (through June 10th) 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.

[company-follow-email id=1009829][/company-follow-email]

Disclosure: None. This article was originally published at Insider Monkey.

Related Content