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Did The Smart Money Play PVH Corp (PVH) Correctly?

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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards PVH Corp (NYSE:PVH) and determine whether hedge funds skillfully traded this stock.

Is PVH Corp (NYSE:PVH) a healthy stock for your portfolio? The smart money was taking an optimistic view. The number of long hedge fund positions went up by 10 lately. PVH Corp (NYSE:PVH) was in 38 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 44. Our calculations also showed that PVH isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 28 hedge funds in our database with PVH holdings at the end of June.

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. Now let's analyze the key hedge fund action regarding PVH Corp (NYSE:PVH).

Richard Pzena - Pzena Investment Management
Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

Do Hedge Funds Think PVH Is A Good Stock To Buy Now?

At Q3's end, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the previous quarter. By comparison, 28 hedge funds held shares or bullish call options in PVH a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in PVH Corp (NYSE:PVH), which was worth $773.3 million at the end of the third quarter. On the second spot was Lone Pine Capital which amassed $339 million worth of shares. Egerton Capital Limited, Viking Global, and Melvin Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Stormborn Capital Management allocated the biggest weight to PVH Corp (NYSE:PVH), around 3.87% of its 13F portfolio. Pzena Investment Management is also relatively very bullish on the stock, earmarking 3.06 percent of its 13F equity portfolio to PVH.

Now, specific money managers have jumped into PVH Corp (NYSE:PVH) headfirst. Egerton Capital Limited, managed by John Armitage, initiated the biggest position in PVH Corp (NYSE:PVH). Egerton Capital Limited had $259.7 million invested in the company at the end of the quarter. Alexander Mitchell's Scopus Asset Management also made a $33.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Gregg Moskowitz's Interval Partners, Bruce Emery's Greenvale Capital, and Michael Gelband's ExodusPoint Capital.

Let's now take a look at hedge fund activity in other stocks similar to PVH Corp (NYSE:PVH). These stocks are Pearson PLC (NYSE:PSO), Chemed Corporation (NYSE:CHE), Legend Biotech Corporation (NASDAQ:LEGN), OneMain Holdings Inc (NYSE:OMF), Plains All American Pipeline, L.P. (NASDAQ:PAA), Companhia Siderurgica Nacional (NYSE:SID), and Polaris Inc. (NYSE:PII). This group of stocks' market caps match PVH's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PSO,8,15064,1 CHE,20,272040,-10 LEGN,14,947002,-5 OMF,41,1047061,0 PAA,7,51655,0 SID,11,46539,-1 PII,15,287576,-5 Average,16.6,380991,-2.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $381 million. That figure was $2157 million in PVH's case. OneMain Holdings Inc (NYSE:OMF) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NASDAQ:PAA) is the least popular one with only 7 bullish hedge fund positions. PVH Corp (NYSE:PVH) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PVH is 81.5. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, PVH wasn't nearly as popular as these 5 stocks and hedge funds that were betting on PVH were disappointed as the stock returned -7.5% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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