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Is JWN Stock A Buy or Sell?

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·6 min read
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In this article we will analyze whether Nordstrom, Inc. (NYSE:JWN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is WN stock a buy? Hedge funds were taking an optimistic view. The number of long hedge fund bets moved up by 5 recently. Nordstrom, Inc. (NYSE:JWN) was in 34 hedge funds' portfolios at the end of December. The all time high for this statistic is 38. Our calculations also showed that JWN isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Lee Ainslie's Top 10 Stock Picks
Lee Ainslie's Top 10 Stock Picks

Lee Ainslie of Maverick Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to take a look at the recent hedge fund action regarding Nordstrom, Inc. (NYSE:JWN).

Do Hedge Funds Think JWN Is A Good Stock To Buy Now?

At Q4's end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JWN over the last 22 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.

When looking at the institutional investors followed by Insider Monkey, Candlestick Capital Management, managed by Jack Woodruff, holds the largest position in Nordstrom, Inc. (NYSE:JWN). Candlestick Capital Management has a $43.7 million position in the stock, comprising 1% of its 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $41.3 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Schonfeld Strategic Advisors, Ken Griffin's Citadel Investment Group and Robert Pohly's Samlyn Capital. In terms of the portfolio weights assigned to each position Empirical Capital Partners allocated the biggest weight to Nordstrom, Inc. (NYSE:JWN), around 8.95% of its 13F portfolio. Pacifica Capital Investments is also relatively very bullish on the stock, earmarking 5.94 percent of its 13F equity portfolio to JWN.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls' herd. Candlestick Capital Management, managed by Jack Woodruff, initiated the most valuable position in Nordstrom, Inc. (NYSE:JWN). Candlestick Capital Management had $43.7 million invested in the company at the end of the quarter. Schonfeld Strategic Advisors also made a $27 million investment in the stock during the quarter. The other funds with brand new JWN positions are Robert Pohly's Samlyn Capital, Matthew Hulsizer's PEAK6 Capital Management, and Lee Ainslie's Maverick Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Nordstrom, Inc. (NYSE:JWN) but similarly valued. We will take a look at The Wendy's Company (NASDAQ:WEN), Brixmor Property Group Inc (NYSE:BRX), Power Integrations Inc (NASDAQ:POWI), Nextera Energy Partners LP (NYSE:NEP), New York Community Bancorp, Inc. (NYSE:NYCB), Pinnacle Financial Partners (NASDAQ:PNFP), and Virtu Financial Inc (NASDAQ:VIRT). All of these stocks' market caps resemble JWN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WEN,31,1061687,4 BRX,6,23694,-12 POWI,17,109029,-3 NEP,32,293709,10 NYCB,25,244102,-3 PNFP,13,59770,-9 VIRT,27,227716,1 Average,21.6,288530,-1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $289 million. That figure was $250 million in JWN's case. Nextera Energy Partners LP (NYSE:NEP) is the most popular stock in this table. On the other hand Brixmor Property Group Inc (NYSE:BRX) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Nordstrom, Inc. (NYSE:JWN) is more popular among hedge funds. Our overall hedge fund sentiment score for JWN is 86.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7.9% in 2021 through April 1st but still managed to beat the market by 0.4 percentage points. Hedge funds were also right about betting on JWN as the stock returned 17.8% since the end of December (through 4/1) 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.

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

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