At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards V.F. Corporation (NYSE:VFC) at the end of the first quarter and determine whether the smart money was really smart about this stock.
V.F. Corporation (NYSE:VFC) has experienced a decrease in hedge fund sentiment recently. VFC was in 19 hedge funds' portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with VFC positions at the end of the previous quarter. Our calculations also showed that VFC isn't among the 30 most popular stocks among hedge funds (click for Q1 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we're going to take a gander at the key hedge fund action encompassing V.F. Corporation (NYSE:VFC).
What does smart money think about V.F. Corporation (NYSE:VFC)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -34% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VFC over the last 18 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in V.F. Corporation (NYSE:VFC) was held by Diamond Hill Capital, which reported holding $63.1 million worth of stock at the end of September. It was followed by AQR Capital Management with a $27.8 million position. Other investors bullish on the company included Arrowstreet Capital, Two Sigma Advisors, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Diamond Hill Capital allocated the biggest weight to V.F. Corporation (NYSE:VFC), around 0.43% of its 13F portfolio. Ayrshire Capital Management is also relatively very bullish on the stock, dishing out 0.4 percent of its 13F equity portfolio to VFC.
Because V.F. Corporation (NYSE:VFC) has experienced bearish sentiment from the smart money, logic holds that there is a sect of fund managers that decided to sell off their full holdings heading into Q4. At the top of the heap, Robert Pohly's Samlyn Capital dropped the biggest investment of the 750 funds watched by Insider Monkey, comprising about $114.2 million in stock, and Gregg Moskowitz's Interval Partners was right behind this move, as the fund dropped about $34 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 10 funds heading into Q4.
Let's check out hedge fund activity in other stocks similar to V.F. Corporation (NYSE:VFC). We will take a look at ResMed Inc. (NYSE:RMD), PACCAR Inc (NASDAQ:PCAR), Tyson Foods, Inc. (NYSE:TSN), and Ball Corporation (NYSE:BLL). This group of stocks' market valuations are closest to VFC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RMD,33,167543,12 PCAR,38,486230,2 TSN,41,906465,-17 BLL,41,697826,-3 Average,38.25,564516,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.25 hedge funds with bullish positions and the average amount invested in these stocks was $565 million. That figure was $171 million in VFC's case. Tyson Foods, Inc. (NYSE:TSN) is the most popular stock in this table. On the other hand ResMed Inc. (NYSE:RMD) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks V.F. Corporation (NYSE:VFC) is even less popular than RMD. Hedge funds dodged a bullet by taking a bearish stance towards VFC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but managed to beat the market by 17.1 percentage points. Unfortunately VFC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); VFC investors were disappointed as the stock returned 13.3% since Q1 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.