In this article we are going to use hedge fund sentiment as a tool and determine whether BlueLinx Holdings Inc. (NYSE:BXC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is BXC a good stock to buy now? BlueLinx Holdings Inc. (NYSE:BXC) investors should be aware of an increase in enthusiasm from smart money of late. BlueLinx Holdings Inc. (NYSE:BXC) was in 13 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 13. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that BXC 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are a lot of signals stock traders use to size up their holdings. Two of the most innovative signals are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite investment managers can outperform the market by a significant amount (see the details here).
Jeffrey Gendell of Tontine Asset Management
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. Now let's check out the recent hedge fund action encompassing BlueLinx Holdings Inc. (NYSE:BXC).
Do Hedge Funds Think BXC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in BXC over the last 21 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Nokomis Capital, managed by Brett Hendrickson, holds the biggest position in BlueLinx Holdings Inc. (NYSE:BXC). Nokomis Capital has a $27.6 million position in the stock, comprising 12.8% of its 13F portfolio. Coming in second is Solas Capital Management, managed by Frederick Tucker Golden, which holds a $10.3 million position; the fund has 9.9% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish encompass Jeffrey Gendell's Tontine Asset Management, Scott Stewart Miller's Greenhaven Road Investment Management and Travis Cocke's Voss Capital. In terms of the portfolio weights assigned to each position Nokomis Capital allocated the biggest weight to BlueLinx Holdings Inc. (NYSE:BXC), around 12.8% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, designating 9.9 percent of its 13F equity portfolio to BXC.
Consequently, some big names have jumped into BlueLinx Holdings Inc. (NYSE:BXC) headfirst. Voss Capital, managed by Travis Cocke, initiated the most valuable position in BlueLinx Holdings Inc. (NYSE:BXC). Voss Capital had $2.9 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Brian C. Freckmann's Lyon Street Capital, John Overdeck and David Siegel's Two Sigma Advisors, and Ken Griffin's Citadel Investment Group.
Let's now take a look at hedge fund activity in other stocks similar to BlueLinx Holdings Inc. (NYSE:BXC). We will take a look at Nesco Holdings, Inc. (NYSE:NSCO), scPharmaceuticals Inc. (NASDAQ:SCPH), PCSB Financial Corporation (NASDAQ:PCSB), Rayonier Advanced Materials Inc (NYSE:RYAM), Park-Ohio Holdings Corp. (NASDAQ:PKOH), Solar Senior Capital Ltd (NASDAQ:SUNS), and DZS Inc. (NASDAQ:DZSI). All of these stocks' market caps are similar to BXC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NSCO,11,11984,1 SCPH,12,85081,1 PCSB,11,17872,2 RYAM,10,19326,0 PKOH,6,16550,-2 SUNS,2,1073,0 DZSI,4,10546,-2 Average,8,23205,0 [/table]
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $65 million in BXC's case. scPharmaceuticals Inc. (NASDAQ:SCPH) is the most popular stock in this table. On the other hand Solar Senior Capital Ltd (NASDAQ:SUNS) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks BlueLinx Holdings Inc. (NYSE:BXC) is more popular among hedge funds. Our overall hedge fund sentiment score for BXC is 88. 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 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 returned 32.9% in 2020 through December 8th but still managed to beat the market by 16.2 percentage points. Hedge funds were also right about betting on BXC as the stock returned 19% since the end of September (through 12/8) 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.
