We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Nordstrom, Inc. (NYSE:JWN) and determine whether hedge funds skillfully traded this stock.
Is Nordstrom, Inc. (NYSE:JWN) a buy, sell, or hold? The best stock pickers were buying. The number of bullish hedge fund positions went up by 3 recently. Nordstrom, Inc. (NYSE:JWN) was in 28 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 38. Our calculations also showed that JWN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
According to most market participants, hedge funds are seen as worthless, old financial vehicles of yesteryear. While there are over 8000 funds trading at present, Our experts hone in on the aristocrats of this club, around 850 funds. Most estimates calculate that this group of people administer bulk of all hedge funds' total capital, and by shadowing their best equity investments, Insider Monkey has come up with a number of investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Ken Griffin of Citadel Investment Group
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we're going to take a look at the fresh hedge fund action surrounding Nordstrom, Inc. (NYSE:JWN).
Hedge fund activity in Nordstrom, Inc. (NYSE:JWN)
At the end of June, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JWN over the last 20 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Nordstrom, Inc. (NYSE:JWN) was held by Arrowstreet Capital, which reported holding $47.7 million worth of stock at the end of September. It was followed by Antipodes Partners with a $32.8 million position. Other investors bullish on the company included Steadfast Capital Management, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Pacifica Capital Investments allocated the biggest weight to Nordstrom, Inc. (NYSE:JWN), around 3.33% of its 13F portfolio. Stamos Capital is also relatively very bullish on the stock, earmarking 1.71 percent of its 13F equity portfolio to JWN.
As industrywide interest jumped, some big names were breaking ground themselves. Steadfast Capital Management, managed by Robert Pitts, initiated the most outsized position in Nordstrom, Inc. (NYSE:JWN). Steadfast Capital Management had $32.6 million invested in the company at the end of the quarter. Joe DiMenna's ZWEIG DIMENNA PARTNERS also made a $3.4 million investment in the stock during the quarter. The other funds with brand new JWN positions are Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners, Michael Gelband's ExodusPoint Capital, and Cristan Blackman's Empirical Capital Partners.
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 Antero Midstream Corp (NYSE:AM), Commercial Metals Company (NYSE:CMC), 2U Inc (NASDAQ:TWOU), Franklin Electric Co., Inc. (NASDAQ:FELE), Weingarten Realty Investors (NYSE:WRI), F.N.B. Corp (NYSE:FNB), and Baozun Inc (NASDAQ:BZUN). This group of stocks' market caps are similar to JWN's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AM,14,116661,0 CMC,22,153574,3 TWOU,24,285907,10 FELE,15,176038,-1 WRI,19,86620,-1 FNB,24,68816,0 BZUN,15,70738,3 Average,19,136908,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $182 million in JWN's case. 2U Inc (NASDAQ:TWOU) is the most popular stock in this table. On the other hand Antero Midstream Corp (NYSE:AM) is the least popular one with only 14 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 80.1. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Unfortunately JWN wasn't nearly as popular as these 10 stocks and hedge funds that were betting on JWN were disappointed as the stock returned -23% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.