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 have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their June 28 holdings, data that is available nowhere else. Should you consider Big Lots, Inc. (NYSE:BIG) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Hedge fund interest in Big Lots, Inc. (NYSE:BIG) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare BIG to other stocks including Cango Inc. (NYSE:CANG), Piper Jaffray Companies (NYSE:PJC), and Par Pacific Holdings, Inc. (NYSE:PARR) to get a better sense of its popularity. Our calculations also showed that BIG 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.
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 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 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.
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. We're going to go over the key hedge fund action encompassing Big Lots, Inc. (NYSE:BIG).
What does smart money think about Big Lots, Inc. (NYSE:BIG)?
At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BIG over the last 16 quarters. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Big Lots, Inc. (NYSE:BIG), which was worth $36.1 million at the end of the second quarter. On the second spot was Millennium Management which amassed $19.3 million worth of shares. Moreover, Balyasny Asset Management, Citadel Investment Group, and Renaissance Technologies were also bullish on Big Lots, Inc. (NYSE:BIG), allocating a large percentage of their portfolios to this stock.
Due to the fact that Big Lots, Inc. (NYSE:BIG) has experienced a decline in interest from the smart money, it's safe to say that there were a few money managers that elected to cut their entire stakes in the second quarter. Interestingly, Matthew Hulsizer's PEAK6 Capital Management dropped the biggest position of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $2.8 million in stock. David Costen Haley's fund, HBK Investments, also dropped its stock, about $1.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Big Lots, Inc. (NYSE:BIG) but similarly valued. These stocks are Cango Inc. (NYSE:CANG), Piper Jaffray Companies (NYSE:PJC), Par Pacific Holdings, Inc. (NYSE:PARR), and Synaptics Incorporated (NASDAQ:SYNA). This group of stocks' market caps are similar to BIG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CANG,1,414,-1 PJC,9,50094,1 PARR,14,121798,-2 SYNA,13,179495,-8 Average,9.25,87950,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $117 million in BIG's case. Par Pacific Holdings, Inc. (NYSE:PARR) is the most popular stock in this table. On the other hand Cango Inc. (NYSE:CANG) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Big Lots, Inc. (NYSE:BIG) 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 BIG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on BIG were disappointed as the stock returned -13.3% 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.