Is Jerash Holdings (US), Inc. (NASDAQ:JRSH) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Jerash Holdings (US), Inc. (NASDAQ:JRSH) was in 3 hedge funds' portfolios at the end of September. JRSH has seen an increase in hedge fund sentiment of late. There were 1 hedge funds in our database with JRSH positions at the end of the previous quarter. Our calculations also showed that JRSH isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_193003" align="aligncenter" width="450"] Chuck Royce of Royce & Associates[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to view the key hedge fund action surrounding Jerash Holdings (US), Inc. (NASDAQ:JRSH).
What have hedge funds been doing with Jerash Holdings (US), Inc. (NASDAQ:JRSH)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 200% from the previous quarter. The graph below displays the number of hedge funds with bullish position in JRSH over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Jerash Holdings (US), Inc. (NASDAQ:JRSH), which was worth $1.1 million at the end of the third quarter. On the second spot was Millennium Management which amassed $0.2 million worth of shares. Renaissance Technologies was 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 Royce & Associates allocated the biggest weight to Jerash Holdings (US), Inc. (NASDAQ:JRSH), around 0.01% of its portfolio. Millennium Management is also relatively very bullish on the stock, earmarking 0.0004 percent of its 13F equity portfolio to JRSH.
As industrywide interest jumped, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the most valuable position in Jerash Holdings (US), Inc. (NASDAQ:JRSH). Millennium Management had $0.2 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.1 million investment in the stock during the quarter.
Let's also examine hedge fund activity in other stocks similar to Jerash Holdings (US), Inc. (NASDAQ:JRSH). These stocks are J. Jill, Inc. (NYSE:JILL), Destination XL Group Inc (NASDAQ:DXLG), VBI Vaccines, Inc. (NASDAQ:VBIV), and Selecta Biosciences, Inc. (NASDAQ:SELB). All of these stocks' market caps resemble JRSH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JILL,6,2206,-2 DXLG,6,31087,-1 VBIV,9,48310,6 SELB,9,14294,1 Average,7.5,23974,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $1 million in JRSH's case. VBI Vaccines, Inc. (NASDAQ:VBIV) is the most popular stock in this table. On the other hand J. Jill, Inc. (NYSE:JILL) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Jerash Holdings (US), Inc. (NASDAQ:JRSH) is even less popular than JILL. Hedge funds dodged a bullet by taking a bearish stance towards JRSH. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately JRSH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); JRSH investors were disappointed as the stock returned -10% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.