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Is ANF Stock A Buy or Sell?

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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Abercrombie & Fitch Co. (NYSE:ANF).

Is ANF stock a buy? Abercrombie & Fitch Co. (NYSE:ANF) shareholders have witnessed an increase in hedge fund sentiment lately. Abercrombie & Fitch Co. (NYSE:ANF) 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 27 hedge funds in our database with ANF positions at the end of the third quarter. Our calculations also showed that ANF isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Gabriel Plotkin Melvin Capital Management
Gabriel Plotkin Melvin 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. Now let's go over the recent hedge fund action surrounding Abercrombie & Fitch Co. (NYSE:ANF).

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

Heading into the first quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in ANF a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ANF A Good Stock To Buy?
Is ANF A Good Stock To Buy?

The largest stake in Abercrombie & Fitch Co. (NYSE:ANF) was held by Paradice Investment Management, which reported holding $56.8 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $47.5 million position. Other investors bullish on the company included D E Shaw, Citadel Investment Group, and Divisar Capital. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Abercrombie & Fitch Co. (NYSE:ANF), around 5.45% of its 13F portfolio. Prentice Capital Management is also relatively very bullish on the stock, dishing out 3.42 percent of its 13F equity portfolio to ANF.

As one would reasonably expect, key hedge funds have been driving this bullishness. Atreides Management, managed by Gavin Baker, assembled the most valuable position in Abercrombie & Fitch Co. (NYSE:ANF). Atreides Management had $14.9 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $10.4 million position during the quarter. The following funds were also among the new ANF investors: Gabriel Plotkin's Melvin Capital Management, Robert Pohly's Samlyn Capital, and Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital.

Let's now take a look at hedge fund activity in other stocks similar to Abercrombie & Fitch Co. (NYSE:ANF). These stocks are Middlesex Water Company (NASDAQ:MSEX), Fulgent Genetics, Inc. (NASDAQ:FLGT), Compass Diversified Holdings (NYSE:CODI), Nano Dimension Ltd. (NASDAQ:NNDM), Ultra Clean Holdings Inc (NASDAQ:UCTT), Repare Therapeutics Inc. (NASDAQ:RPTX), and FARO Technologies, Inc. (NASDAQ:FARO). All of these stocks' market caps are similar to ANF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MSEX,5,55536,0 FLGT,12,55366,6 CODI,4,16908,1 NNDM,6,89719,4 UCTT,21,117473,1 RPTX,18,416751,3 FARO,13,173706,2 Average,11.3,132208,2.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.3 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $283 million in ANF's case. Ultra Clean Holdings Inc (NASDAQ:UCTT) is the most popular stock in this table. On the other hand Compass Diversified Holdings (NYSE:CODI) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Abercrombie & Fitch Co. (NYSE:ANF) is more popular among hedge funds. Our overall hedge fund sentiment score for ANF is 80.7. 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 returned 12.3% in 2021 through April 19th but still managed to beat the market by 0.9 percentage points. Hedge funds were also right about betting on ANF as the stock returned 95.1% since the end of December (through 4/19) 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.

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