U.S. Markets closed

Is Citi Trends, Inc. (CTRN) Going to Burn These Hedge Funds?

  • Oops!
    Something went wrong.
    Please try again later.
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 15.1% over the last 12 months (vs. 5.6% gain for SPY), with 53% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Citi Trends, Inc. (NASDAQ:CTRN).

Is Citi Trends, Inc. (NASDAQ:CTRN) the right pick for your portfolio? The smart money is turning bullish. The number of long hedge fund bets advanced by 1 lately. Our calculations also showed that ctrn isn't among the 30 most popular stocks among hedge funds. CTRN was in 14 hedge funds' portfolios at the end of September. There were 13 hedge funds in our database with CTRN positions at the end of the previous quarter.

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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_30621" align="aligncenter" width="487"]

AQR CAPITAL MANAGEMENT
AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management[/caption]

We're going to take a look at the latest hedge fund action encompassing Citi Trends, Inc. (NASDAQ:CTRN).

How have hedgies been trading Citi Trends, Inc. (NASDAQ:CTRN)?

At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the second quarter of 2018. By comparison, 12 hedge funds held shares or bullish call options in CTRN heading into this year. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

No of Hedge Funds with CTRN Positions
No of Hedge Funds with CTRN Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness's AQR Capital Management has the biggest position in Citi Trends, Inc. (NASDAQ:CTRN), worth close to $14.6 million, amounting to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Millennium Management, managed by Israel Englander, which holds a $5.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions consist of Noam Gottesman's GLG Partners, D. E. Shaw's D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

As industrywide interest jumped, specific money managers have jumped into Citi Trends, Inc. (NASDAQ:CTRN) headfirst. Element Capital Management, managed by Jeffrey Talpins, assembled the most outsized position in Citi Trends, Inc. (NASDAQ:CTRN). Element Capital Management had $0.2 million invested in the company at the end of the quarter. Mike Vranos's Ellington also made a $0.2 million investment in the stock during the quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Citi Trends, Inc. (NASDAQ:CTRN) but similarly valued. We will take a look at Castlight Health Inc (NYSE:CSLT), Denison Mines Corp (NYSE:DNN), MFS Charter Income Trust (NYSE:MCR), and Blackrock MuniHoldings New York (NYSE:MHN). This group of stocks' market caps are similar to CTRN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSLT,11,15669,-1 DNN,3,423,0 MCR,1,662,-1 MHN,3,609,0 Average,4.5,4341,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.5 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $47 million in CTRN's case. Castlight Health Inc (NYSE:CSLT) is the most popular stock in this table. On the other hand MFS Charter Income Trust (NYSE:MCR) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Citi Trends, Inc. (NASDAQ:CTRN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None. This article was originally published at Insider Monkey.

Related Content

  • How to Best Use Insider Monkey To Increase Your Returns

  • Billionaire Ken Fisher’s Top Dividend Stock Picks

  • 30 Stocks Billionaires Are Crazy About: Insider Monkey Billionaire Stock Index