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Is FL Stock A Buy or Sell?

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·5 min read
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Is Foot Locker, Inc. (NYSE:FL) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is FL stock a buy? Foot Locker, Inc. (NYSE:FL) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 26 hedge funds' portfolios at the end of December. Our calculations also showed that FL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Upwork Inc. (NASDAQ:UPWK), Tenet Healthcare Corp (NYSE:THC), and United Bankshares, Inc. (NASDAQ:UBSI) to gather more data points.

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Now we're going to take a peek at the fresh hedge fund action regarding Foot Locker, Inc. (NYSE:FL).

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

At Q4's end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FL over the last 22 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Vesa Equity Investment was the largest shareholder of Foot Locker, Inc. (NYSE:FL), with a stake worth $522.9 million reported as of the end of December. Trailing Vesa Equity Investment was Arrowstreet Capital, which amassed a stake valued at $60.3 million. Two Sigma Advisors, AQR Capital Management, and Renaissance Technologies 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 Vesa Equity Investment allocated the biggest weight to Foot Locker, Inc. (NYSE:FL), around 97.39% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, designating 0.72 percent of its 13F equity portfolio to FL.

Since Foot Locker, Inc. (NYSE:FL) has experienced declining sentiment from the smart money, we can see that there is a sect of hedgies that decided to sell off their positions entirely last quarter. It's worth mentioning that Joe DiMenna's ZWEIG DIMENNA PARTNERS said goodbye to the biggest position of the 750 funds watched by Insider Monkey, comprising close to $9 million in stock, and Kerr Neilson's Platinum Asset Management was right behind this move, as the fund dropped about $4.4 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Foot Locker, Inc. (NYSE:FL) but similarly valued. These stocks are Upwork Inc. (NASDAQ:UPWK), Tenet Healthcare Corp (NYSE:THC), United Bankshares, Inc. (NASDAQ:UBSI), Clean Harbors Inc (NYSE:CLH), SYNNEX Corporation (NYSE:SNX), HollyFrontier Corporation (NYSE:HFC), and PNM Resources, Inc. (NYSE:PNM). This group of stocks' market caps match FL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UPWK,34,548991,7 THC,34,1210954,1 UBSI,9,86644,-10 CLH,22,308152,-2 SNX,24,444472,-3 HFC,34,269066,6 PNM,30,1010717,7 Average,26.7,554142,0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.7 hedge funds with bullish positions and the average amount invested in these stocks was $554 million. That figure was $774 million in FL's case. Upwork Inc. (NASDAQ:UPWK) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 9 bullish hedge fund positions. Foot Locker, Inc. (NYSE:FL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for FL is 59.5. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. A small number of hedge funds were also right about betting on FL as the stock returned 44.5% since the end of the fourth quarter (through 4/19) and outperformed the market by an even larger margin.

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

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