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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the third quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Guess', Inc. (NYSE:GES) based on that data.
Is GES a good stock to buy now? Guess', Inc. (NYSE:GES) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 20. GES investors should pay attention to a decrease in hedge fund sentiment recently. There were 18 hedge funds in our database with GES positions at the end of the second quarter. Our calculations also showed that GES isn't among the 30 most popular stocks among hedge funds (click for Q3 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. With all of this in mind we're going to view the key hedge fund action regarding Guess', Inc. (NYSE:GES).
Do Hedge Funds Think GES Is A Good Stock To Buy Now?
At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in GES over the last 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, D. E. Shaw's D E Shaw has the largest position in Guess', Inc. (NYSE:GES), worth close to $15.6 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Ben Levine, Andrew Manuel and Stefan Renold of LMR Partners, with a $13.3 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Ken Griffin's Citadel Investment Group, Michael Zimmerman's Prentice Capital Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Guess', Inc. (NYSE:GES), around 1.84% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, designating 0.27 percent of its 13F equity portfolio to GES.
Seeing as Guess', Inc. (NYSE:GES) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there were a few money managers that elected to cut their positions entirely by the end of the third quarter. It's worth mentioning that Richard Mashaal's Rima Senvest Management sold off the biggest stake of all the hedgies followed by Insider Monkey, valued at about $14.9 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund said goodbye to about $14.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Guess', Inc. (NYSE:GES) but similarly valued. We will take a look at Antero Resources Corp (NYSE:AR), Rosetta Stone Inc (NYSE:RST), Costamare Inc (NYSE:CMRE), Axcelis Technologies Inc (NASDAQ:ACLS), China Yuchai International Limited (NYSE:CYD), Benchmark Electronics, Inc. (NYSE:BHE), and Agenus Inc (NASDAQ:AGEN). This group of stocks' market valuations resemble GES's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AR,21,203978,0 RST,26,191347,5 CMRE,13,32878,0 ACLS,20,88812,0 CYD,10,80331,3 BHE,10,21753,-4 AGEN,13,57826,-2 Average,16.1,96704,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $51 million in GES's case. Rosetta Stone Inc (NYSE:RST) is the most popular stock in this table. On the other hand China Yuchai International Limited (NYSE:CYD) is the least popular one with only 10 bullish hedge fund positions. Guess', Inc. (NYSE:GES) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GES is 51.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on GES as the stock returned 58.3% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.