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 Capri Holdings Limited (NYSE:CPRI) to find out whether it was one of their high conviction long-term ideas.
Capri Holdings Limited (NYSE:CPRI) was in 35 hedge funds' portfolios at the end of the second quarter of 2019. CPRI shareholders have witnessed a decrease in activity from the world's largest hedge funds of late. There were 37 hedge funds in our database with CPRI holdings at the end of the previous quarter. Our calculations also showed that CPRI isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 some fund managers who are betting on Dow reaching 40000 in a year, 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 take a peek at the fresh hedge fund action regarding Capri Holdings Limited (NYSE:CPRI).
What does smart money think about Capri Holdings Limited (NYSE:CPRI)?
At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CPRI over the last 16 quarters. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ricky Sandler's Eminence Capital has the largest position in Capri Holdings Limited (NYSE:CPRI), worth close to $313 million, amounting to 4.1% of its total 13F portfolio. Coming in second is AQR Capital Management, led by Cliff Asness, holding a $112.2 million position; 0.1% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that are bullish include Richard Mashaal's Rima Senvest Management, Israel Englander's Millennium Management and Ken Griffin's Citadel Investment Group.
Because Capri Holdings Limited (NYSE:CPRI) has faced falling interest from the aggregate hedge fund industry, logic holds that there is a sect of hedgies that decided to sell off their full holdings in the second quarter. At the top of the heap, Aaron Cowen's Suvretta Capital Management said goodbye to the biggest position of all the hedgies watched by Insider Monkey, worth an estimated $18.8 million in stock. Jeffrey Talpins's fund, Element Capital Management, also dumped its stock, about $12.9 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds in the second quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Capri Holdings Limited (NYSE:CPRI) but similarly valued. We will take a look at XPO Logistics Inc (NYSE:XPO), IDACORP Inc (NYSE:IDA), Compania Cervecerias Unidas S.A. (NYSE:CCU), and Primerica, Inc. (NYSE:PRI). This group of stocks' market values match CPRI's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position XPO,24,2275608,-2 IDA,22,332483,4 CCU,10,69208,-1 PRI,26,334200,14 Average,20.5,752875,3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $753 million. That figure was $809 million in CPRI's case. Primerica, Inc. (NYSE:PRI) is the most popular stock in this table. On the other hand Compania Cervecerias Unidas S.A. (NYSE:CCU) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Capri Holdings Limited (NYSE:CPRI) 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 CPRI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on CPRI were disappointed as the stock returned -4.4% 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 (view the video below) among hedge funds as many of these stocks already outperformed the market in Q3. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.