Jacobs Engineering Group Inc. (J): Hedge Funds Are Coming Back

·6 min read

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 873 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of June 30th, 2021. In this article we are going to take a look at smart money sentiment towards Jacobs Engineering Group Inc. (NYSE:J).

Jacobs Engineering Group Inc. (NYSE:J) shareholders have witnessed an increase in hedge fund interest recently. Jacobs Engineering Group Inc. (NYSE:J) was in 29 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that J isn't among the 30 most popular stocks among hedge funds (click for Q2 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 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 79 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.

Robert Pohly of Samlyn Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind we're going to take a look at the latest hedge fund action surrounding Jacobs Engineering Group Inc. (NYSE:J).

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

At second quarter's end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards J over the last 24 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Select Equity Group was the largest shareholder of Jacobs Engineering Group Inc. (NYSE:J), with a stake worth $640 million reported as of the end of June. Trailing Select Equity Group was Empyrean Capital Partners, which amassed a stake valued at $126 million. Arrowstreet Capital, Samlyn Capital, and Renaissance Technologies 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 Bourgeon Capital allocated the biggest weight to Jacobs Engineering Group Inc. (NYSE:J), around 3.04% of its 13F portfolio. Empyrean Capital Partners is also relatively very bullish on the stock, designating 2.88 percent of its 13F equity portfolio to J.

As one would reasonably expect, some big names have jumped into Jacobs Engineering Group Inc. (NYSE:J) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Jacobs Engineering Group Inc. (NYSE:J). Arrowstreet Capital had $40.1 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $10.6 million position during the quarter. The other funds with brand new J positions are Roger Keith Long's Otter Creek Management, Qing Li's Sciencast Management, and Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Jacobs Engineering Group Inc. (NYSE:J) but similarly valued. These stocks are The AES Corporation (NYSE:AES), ASE Technology Holding Co., Ltd. (NYSE:ASX), PerkinElmer, Inc. (NYSE:PKI), Viatris Inc. (NASDAQ:VTRS), J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), Omnicom Group Inc. (NYSE:OMC), and Principal Financial Group Inc (NASDAQ:PFG). All of these stocks' market caps resemble J's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AES,39,1422533,-12 ASX,7,241132,-1 PKI,32,1969240,-1 VTRS,53,1532159,-5 JBHT,26,347997,4 OMC,30,668602,-3 PFG,18,217118,-13 Average,29.3,914112,-4.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $914 million. That figure was $1030 million in J's case. Viatris Inc. (NASDAQ:VTRS) is the most popular stock in this table. On the other hand ASE Technology Holding Co., Ltd. (NYSE:ASX) is the least popular one with only 7 bullish hedge fund positions. Jacobs Engineering Group Inc. (NYSE:J) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for J is 58.8. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately J wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); J investors were disappointed as the stock returned 0.7% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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