Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don't make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first half of 2019. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Abercrombie & Fitch Co. (NYSE:ANF) to find out whether it was one of their high conviction long-term ideas.
Abercrombie & Fitch Co. (NYSE:ANF) investors should be aware of an increase in hedge fund interest recently. Our calculations also showed that ANF isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the fresh hedge fund action encompassing Abercrombie & Fitch Co. (NYSE:ANF).
Hedge fund activity in Abercrombie & Fitch Co. (NYSE:ANF)
Heading into the third quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ANF over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Impala Asset Management, managed by Robert Bishop, holds the most valuable position in Abercrombie & Fitch Co. (NYSE:ANF). Impala Asset Management has a $23.4 million position in the stock, comprising 1.1% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, led by Ken Griffin, holding a $19.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise D. E. Shaw's D E Shaw, Alexander Mitchell's Scopus Asset Management and Israel Englander's Millennium Management.
Now, specific money managers have been driving this bullishness. Impala Asset Management, managed by Robert Bishop, created the largest position in Abercrombie & Fitch Co. (NYSE:ANF). Impala Asset Management had $23.4 million invested in the company at the end of the quarter. Alexander Mitchell's Scopus Asset Management also made a $15.2 million investment in the stock during the quarter. The other funds with brand new ANF positions are Israel Englander's Millennium Management, Sara Nainzadeh's Centenus Global Management, and Bill Miller's Miller Value Partners.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Abercrombie & Fitch Co. (NYSE:ANF) but similarly valued. These stocks are Granite Point Mortgage Trust Inc. (NYSE:GPMT), Xperi Corporation (NASDAQ:XPER), Enviva Partners, LP (NYSE:EVA), and Playa Hotels & Resorts N.V. (NASDAQ:PLYA). This group of stocks' market values match ANF's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPMT,9,20565,-3 XPER,21,110729,-2 EVA,7,83902,0 PLYA,18,405569,-1 Average,13.75,155191,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $155 million. That figure was $124 million in ANF's case. Xperi Corporation (NASDAQ:XPER) is the most popular stock in this table. On the other hand Enviva Partners, LP (NYSE:EVA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Abercrombie & Fitch Co. (NYSE:ANF) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ANF wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ANF were disappointed as the stock returned -1.4% during the third 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.
Disclosure: None. This article was originally published at Insider Monkey.