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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 Fossil Group Inc (NASDAQ:FOSL).
Hedge fund interest in Fossil Group Inc (NASDAQ:FOSL) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that FOSL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare FOSL to other stocks including Napco Security Technologies Inc (NASDAQ:NSSC), MeiraGTx Holdings plc (NASDAQ:MGTX), and Arch Resources, Inc. (NYSE:ARCH) to get a better sense of its popularity.
To the average investor there are several tools market participants use to grade their stock investments. A duo of the most useful tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce their index-focused peers by a very impressive margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
David Harding of Winton Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 view the new hedge fund action regarding Fossil Group Inc (NASDAQ:FOSL).
Do Hedge Funds Think FOSL Is A Good Stock To Buy Now?
At the end of March, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in FOSL a year ago. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Contrarius Investment Management, managed by Stephen Mildenhall, holds the number one position in Fossil Group Inc (NASDAQ:FOSL). Contrarius Investment Management has a $49 million position in the stock, comprising 2.8% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, which holds a $18.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish contain D. E. Shaw's D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Dmitry Balyasny's Balyasny Asset Management. In terms of the portfolio weights assigned to each position Contrarius Investment Management allocated the biggest weight to Fossil Group Inc (NASDAQ:FOSL), around 2.77% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.04 percent of its 13F equity portfolio to FOSL.
Judging by the fact that Fossil Group Inc (NASDAQ:FOSL) has witnessed falling interest from hedge fund managers, we can see that there was a specific group of hedge funds who were dropping their full holdings heading into Q2. It's worth mentioning that David Harding's Winton Capital Management cut the largest position of all the hedgies followed by Insider Monkey, comprising about $0.3 million in stock. Valerie Malter's fund, Matarin Capital, also said goodbye to its stock, about $0.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Fossil Group Inc (NASDAQ:FOSL) but similarly valued. These stocks are Napco Security Technologies Inc (NASDAQ:NSSC), MeiraGTx Holdings plc (NASDAQ:MGTX), Arch Resources, Inc. (NYSE:ARCH), FutureFuel Corp. (NYSE:FF), Sify Technologies Limited (NASDAQ:SIFY), Carriage Services, Inc. (NYSE:CSV), and China Yuchai International Limited (NYSE:CYD). This group of stocks' market values match FOSL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NSSC,4,6359,-2 MGTX,13,227177,-3 ARCH,25,162566,1 FF,9,60745,-1 SIFY,5,3728,1 CSV,11,65276,-4 CYD,8,69474,-1 Average,10.7,85046,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.7 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $100 million in FOSL's case. Arch Resources, Inc. (NYSE:ARCH) is the most popular stock in this table. On the other hand Napco Security Technologies Inc (NASDAQ:NSSC) is the least popular one with only 4 bullish hedge fund positions. Fossil Group Inc (NASDAQ:FOSL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FOSL is 50.1. 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 positive signal but 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 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately FOSL wasn't nearly as popular as these 5 stocks and hedge funds that were betting on FOSL were disappointed as the stock returned 1% since the end of March (through 7/23) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.