We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Jabil Inc. (NYSE:JBL).
Is JBL stock a buy? Jabil Inc. (NYSE:JBL) has experienced a decrease in hedge fund interest lately. Jabil Inc. (NYSE:JBL) was in 28 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 34. There were 31 hedge funds in our database with JBL holdings at the end of September. Our calculations also showed that JBL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).
Cliff Asness of AQR Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now 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. With all of this in mind we're going to check out the new hedge fund action regarding Jabil Inc. (NYSE:JBL).
Do Hedge Funds Think JBL Is A Good Stock To Buy Now?
At the end of December, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the third quarter of 2020. By comparison, 34 hedge funds held shares or bullish call options in JBL a year ago. With hedge funds' sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Point72 Asset Management was the largest shareholder of Jabil Inc. (NYSE:JBL), with a stake worth $106.8 million reported as of the end of December. Trailing Point72 Asset Management was Adage Capital Management, which amassed a stake valued at $82.8 million. Alyeska Investment Group, AQR Capital Management, and Shellback Capital 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 Shellback Capital allocated the biggest weight to Jabil Inc. (NYSE:JBL), around 3.21% of its 13F portfolio. Force Hill Capital Management is also relatively very bullish on the stock, earmarking 1.24 percent of its 13F equity portfolio to JBL.
Since Jabil Inc. (NYSE:JBL) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of hedge funds who sold off their positions entirely in the fourth quarter. Interestingly, Kevin McCarthy's Breakline Capital dropped the largest investment of all the hedgies followed by Insider Monkey, totaling close to $3.2 million in stock. Paul Tudor Jones's fund, Tudor Investment Corp, also dropped its stock, about $1.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 3 funds in the fourth quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Jabil Inc. (NYSE:JBL) but similarly valued. We will take a look at OGE Energy Corp. (NYSE:OGE), Performance Food Group Company (NYSE:PFGC), Penumbra Inc (NYSE:PEN), Stericycle Inc (NASDAQ:SRCL), Capri Holdings Limited (NYSE:CPRI), CDK Global Inc (NASDAQ:CDK), and Reynolds Consumer Products Inc. (NASDAQ:REYN). This group of stocks' market caps match JBL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OGE,20,180367,-2 PFGC,22,281693,-7 PEN,20,280710,-3 SRCL,25,669567,0 CPRI,42,920853,6 CDK,27,392132,-1 REYN,18,228024,0 Average,24.9,421907,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $422 million. That figure was $455 million in JBL's case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Reynolds Consumer Products Inc. (NASDAQ:REYN) is the least popular one with only 18 bullish hedge fund positions. Jabil Inc. (NYSE:JBL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JBL is 47.5. 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 gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on JBL as the stock returned 28% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.