Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
South Jersey Industries Inc (NYSE:SJI) investors should be aware of a decrease in hedge fund interest lately. Our calculations also showed that SJI isn't among the 30 most popular stocks among hedge funds.
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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to view the fresh hedge fund action encompassing South Jersey Industries Inc (NYSE:SJI).
What have hedge funds been doing with South Jersey Industries Inc (NYSE:SJI)?
At the end of the fourth quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in SJI a year ago. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Jim Simons's Renaissance Technologies has the largest position in South Jersey Industries Inc (NYSE:SJI), worth close to $21.9 million, comprising less than 0.1%% of its total 13F portfolio. The second largest stake is held by D E Shaw, led by D. E. Shaw, holding a $13.2 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that are bullish encompass Frederick DiSanto's Ancora Advisors, Jonathan Barrett and Paul Segal's Luminus Management and Michael Gelband's ExodusPoint Capital.
Because South Jersey Industries Inc (NYSE:SJI) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain "tier" of hedgies that elected to cut their entire stakes by the end of the third quarter. Interestingly, Brian Olson, Baehyun Sung, and Jamie Waters's Blackstart Capital dumped the largest investment of all the hedgies followed by Insider Monkey, totaling an estimated $8.2 million in stock, and Sara Nainzadeh's Centenus Global Management was right behind this move, as the fund dropped about $7.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks similar to South Jersey Industries Inc (NYSE:SJI). We will take a look at Brookfield Property REIT Inc. (NASDAQ:BPR), FirstService Corporation (TSE:FSV), Quaker Chemical Corp (NYSE:KWR), and Blueprint Medicines Corporation (NASDAQ:BPMC). This group of stocks' market values resemble SJI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BPR,14,143546,-6 FSV,13,123401,0 KWR,13,148763,2 BPMC,22,391311,-5 Average,15.5,201755,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $202 million. That figure was $70 million in SJI's case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand FirstService Corporation (TSE:FSV) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks South Jersey Industries Inc (NYSE:SJI) is even less popular than FSV. Hedge funds dodged a bullet by taking a bearish stance towards SJI. Our calculations showed that the top 15 most popular hedge fund stocks returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately SJI wasn't nearly as popular as these 15 stock (hedge fund sentiment was very bearish); SJI investors were disappointed as the stock returned 13.5% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.