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After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards New Jersey Resources Corp (NYSE:NJR).
Is NJR a good stock to buy now? Prominent investors were turning less bullish. The number of bullish hedge fund bets shrunk by 2 lately. New Jersey Resources Corp (NYSE:NJR) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 20. Our calculations also showed that NJR isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 14 hedge funds in our database with NJR positions at the end of the second quarter.
Video: 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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
Fred DiSanto of Ancora Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 let's take a glance at the recent hedge fund action encompassing New Jersey Resources Corp (NYSE:NJR).
Do Hedge Funds Think NJR Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in NJR a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Among these funds, Millennium Management held the most valuable stake in New Jersey Resources Corp (NYSE:NJR), which was worth $9.3 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $7.1 million worth of shares. Ancora Advisors, Citadel Investment Group, and Holocene Advisors were 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 Ancora Advisors allocated the biggest weight to New Jersey Resources Corp (NYSE:NJR), around 0.18% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to NJR.
Because New Jersey Resources Corp (NYSE:NJR) has faced bearish sentiment from hedge fund managers, logic holds that there is a sect of money managers that slashed their entire stakes in the third quarter. Intriguingly, Brian Olson, Baehyun Sung, and Jamie Waters's Blackstart Capital said goodbye to the largest stake of all the hedgies followed by Insider Monkey, comprising an estimated $6.4 million in stock, and Minhua Zhang's Weld Capital Management was right behind this move, as the fund cut about $1.6 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to New Jersey Resources Corp (NYSE:NJR). These stocks are STAAR Surgical Company (NASDAQ:STAA), WD-40 Company (NASDAQ:WDFC), Sunnova Energy International Inc. (NYSE:NOVA), Tenet Healthcare Corp (NYSE:THC), ShockWave Medical, Inc. (NASDAQ:SWAV), Nu Skin Enterprises, Inc. (NYSE:NUS), and Tegna Inc (NYSE:TGNA). All of these stocks' market caps are similar to NJR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STAA,13,827132,-7 WDFC,17,163003,2 NOVA,23,422856,13 THC,33,791683,5 SWAV,16,135654,4 NUS,22,315274,-3 TGNA,27,285889,-2 Average,21.6,420213,1.7 [/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 $420 million. That figure was $32 million in NJR's case. Tenet Healthcare Corp (NYSE:THC) is the most popular stock in this table. On the other hand STAAR Surgical Company (NASDAQ:STAA) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks New Jersey Resources Corp (NYSE:NJR) is even less popular than STAA. Our overall hedge fund sentiment score for NJR is 21. 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. Hedge funds clearly dropped the ball on NJR as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on NJR as the stock returned 24.1% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.