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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Skechers USA Inc (NYSE:SKX).
Skechers USA Inc (NYSE:SKX) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 35 hedge funds' portfolios at the end of September. Our calculations also showed that SKX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare SKX to other stocks including Planet Fitness Inc (NYSE:PLNT), Change Healthcare Inc. (NASDAQ:CHNG), and Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) to get a better sense of its popularity.
Richard S. Pzena of Pzena Investment Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let's take a gander at the key hedge fund action regarding Skechers USA Inc (NYSE:SKX).
Do Hedge Funds Think SKX Is A Good Stock To Buy Now?
At Q3's end, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in SKX a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Skechers USA Inc (NYSE:SKX) was held by Pzena Investment Management, which reported holding $196 million worth of stock at the end of September. It was followed by Tremblant Capital with a $115 million position. Other investors bullish on the company included Marshall Wace LLP, Arrowstreet Capital, and Tremblant Capital. In terms of the portfolio weights assigned to each position Venator Capital Management allocated the biggest weight to Skechers USA Inc (NYSE:SKX), around 4.65% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, earmarking 4.13 percent of its 13F equity portfolio to SKX.
Because Skechers USA Inc (NYSE:SKX) has faced bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there was a specific group of fund managers who sold off their entire stakes by the end of the third quarter. At the top of the heap, Dmitry Balyasny's Balyasny Asset Management said goodbye to the largest stake of the 750 funds watched by Insider Monkey, totaling close to $24.9 million in stock. Steve Cohen's fund, Point72 Asset Management, also dropped its stock, about $16.8 million worth. These transactions are interesting, as total 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 Skechers USA Inc (NYSE:SKX) but similarly valued. We will take a look at Planet Fitness Inc (NYSE:PLNT), Change Healthcare Inc. (NASDAQ:CHNG), Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), Virgin Galactic Holdings, Inc. (NYSE:SPCE), Varonis Systems Inc (NASDAQ:VRNS), First Financial Bankshares Inc (NASDAQ:FFIN), and Healthcare Trust Of America Inc (NYSE:HTA). All of these stocks' market caps are similar to SKX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLNT,40,1515923,6 CHNG,50,1557603,-1 ARWR,24,150783,-6 SPCE,16,105669,-2 VRNS,27,298396,3 FFIN,20,81284,12 HTA,14,381781,-9 Average,27.3,584491,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $584 million. That figure was $744 million in SKX's case. Change Healthcare Inc. (NASDAQ:CHNG) is the most popular stock in this table. On the other hand Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 14 bullish hedge fund positions. Skechers USA Inc (NYSE:SKX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SKX is 63.3. 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 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on SKX as the stock returned 6.6% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.