The market has been volatile in the last few months as the Federal Reserve continued its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q2 and the beginning of Q3. In this article, we analyze what the smart money thinks of Jacobs Engineering Group Inc (NYSE:JEC) and find out how it is affected by hedge funds' moves.
Is Jacobs Engineering Group Inc (NYSE:JEC) a buy, sell, or hold? Investors who are in the know are reducing their bets on the stock. The number of long hedge fund bets went down by 1 lately. Our calculations also showed that JEC isn't among the 30 most popular stocks among hedge funds. JEC was in 32 hedge funds' portfolios at the end of June. There were 33 hedge funds in our database with JEC holdings at the end of the previous quarter.
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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 take a look at the key hedge fund action encompassing Jacobs Engineering Group Inc (NYSE:JEC).
Hedge fund activity in Jacobs Engineering Group Inc (NYSE:JEC)
At Q2's end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in JEC over the last 16 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Select Equity Group was the largest shareholder of Jacobs Engineering Group Inc (NYSE:JEC), with a stake worth $449.3 million reported as of the end of March. Trailing Select Equity Group was Citadel Investment Group, which amassed a stake valued at $124 million. Suvretta Capital Management, Alyeska Investment Group, and Scopus Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Jacobs Engineering Group Inc (NYSE:JEC) has faced a decline in interest from hedge fund managers, logic holds that there was a specific group of money managers that elected to cut their entire stakes in the second quarter. At the top of the heap, David Rosen's Rubric Capital Management said goodbye to the largest position of the "upper crust" of funds followed by Insider Monkey, comprising close to $25.2 million in stock, and David Costen Haley's HBK Investments was right behind this move, as the fund dropped about $10 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds in the second quarter.
Let's also examine hedge fund activity in other stocks similar to Jacobs Engineering Group Inc (NYSE:JEC). These stocks are Advance Auto Parts, Inc. (NYSE:AAP), Devon Energy Corporation (NYSE:DVN), Zebra Technologies Corporation (NASDAQ:ZBRA), and C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW). All of these stocks' market caps are closest to JEC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAP,37,1458234,-10 DVN,36,1412120,-4 ZBRA,20,635734,-15 CHRW,20,351182,-10 Average,28.25,964318,-9.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $964 million. That figure was $1045 million in JEC's case. Advance Auto Parts, Inc. (NYSE:AAP) is the most popular stock in this table. On the other hand Zebra Technologies Corporation (NASDAQ:ZBRA) is the least popular one with only 20 bullish hedge fund positions. Jacobs Engineering Group Inc (NYSE:JEC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks (view the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on JEC as the stock returned 8.6% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.