In this article we will analyze whether Caleres Inc (NYSE:CAL) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is CAL a good stock to buy now? Caleres Inc (NYSE:CAL) was in 17 hedge funds' portfolios at the end of September. The all time high for this statistic is 21. CAL investors should pay attention to an increase in support from the world's most elite money managers lately. There were 15 hedge funds in our database with CAL positions at the end of the second quarter. Our calculations also showed that CAL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: 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' 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 66 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.
Lee Ainslie of Maverick Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Keeping this in mind we're going to check out the recent hedge fund action regarding Caleres Inc (NYSE:CAL).
Do Hedge Funds Think CAL Is A Good Stock To Buy Now?
At third quarter's end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in CAL over the last 21 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Caleres Inc (NYSE:CAL) was held by D E Shaw, which reported holding $8.4 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $5.7 million position. Other investors bullish on the company included Maverick Capital, Renaissance Technologies, and North Peak Capital. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to Caleres Inc (NYSE:CAL), around 0.93% of its 13F portfolio. North Peak Capital is also relatively very bullish on the stock, dishing out 0.38 percent of its 13F equity portfolio to CAL.
Consequently, specific money managers were leading the bulls' herd. Renaissance Technologies, founded by Jim Simons, created the most valuable position in Caleres Inc (NYSE:CAL). Renaissance Technologies had $2.1 million invested in the company at the end of the quarter. Michael Kahan and Jeremy Kahan's North Peak Capital also initiated a $2 million position during the quarter. The other funds with brand new CAL positions are Frederick DiSanto's Ancora Advisors, Donald Sussman's Paloma Partners, and Greg Eisner's Engineers Gate Manager.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Caleres Inc (NYSE:CAL) but similarly valued. These stocks are Helix Energy Solutions Group Inc. (NYSE:HLX), Tuscan Holdings Corp. (NASDAQ:THCB), Benefitfocus Inc (NASDAQ:BNFT), Alexco Resource Corp. (NYSE:AXU), AdvanSix Inc. (NYSE:ASIX), Urstadt Biddle Properties Inc (NYSE:UBA), and Sutro Biopharma, Inc. (NASDAQ:STRO). This group of stocks' market valuations are similar to CAL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HLX,14,16489,4 THCB,12,71112,2 BNFT,18,54294,5 AXU,2,671,-3 ASIX,14,42435,-2 UBA,18,28677,3 STRO,23,172590,3 Average,14.4,55181,1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.4 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $30 million in CAL's case. Sutro Biopharma, Inc. (NASDAQ:STRO) is the most popular stock in this table. On the other hand Alexco Resource Corp. (NYSE:AXU) is the least popular one with only 2 bullish hedge fund positions. Caleres Inc (NYSE:CAL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CAL is 67. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on CAL as the stock returned 36.3% since the end of Q3 (through 12/14) 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.