Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Gildan Activewear Inc (NYSE:GIL) investors should be aware of a decrease in enthusiasm from smart money of late. Our calculations also showed that GIL isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to 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' 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 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to go over the key hedge fund action encompassing Gildan Activewear Inc (NYSE:GIL).
What does smart money think about Gildan Activewear Inc (NYSE:GIL)?
At Q2's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the first quarter of 2019. By comparison, 15 hedge funds held shares or bullish call options in GIL a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
Among these funds, Pzena Investment Management held the most valuable stake in Gildan Activewear Inc (NYSE:GIL), which was worth $142.1 million at the end of the second quarter. On the second spot was Southpoint Capital Advisors which amassed $104.5 million worth of shares. Moreover, Arrowstreet Capital, Nokota Management, and Citadel Investment Group were also bullish on Gildan Activewear Inc (NYSE:GIL), allocating a large percentage of their portfolios to this stock.
Judging by the fact that Gildan Activewear Inc (NYSE:GIL) has experienced a decline in interest from the aggregate hedge fund industry, it's safe to say that there lies a certain "tier" of fund managers who sold off their positions entirely last quarter. Interestingly, Cliff Asness's AQR Capital Management dropped the biggest investment of all the hedgies watched by Insider Monkey, totaling about $12.1 million in stock. Peter S. Park's fund, Park West Asset Management, also sold off its stock, about $9 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 3 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Gildan Activewear Inc (NYSE:GIL) but similarly valued. These stocks are News Corp (NASDAQ:NWSA), Fortune Brands Home & Security Inc (NYSE:FBHS), Bruker Corporation (NASDAQ:BRKR), and A. O. Smith Corporation (NYSE:AOS). This group of stocks' market caps are closest to GIL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NWSA,23,351093,2 FBHS,31,642699,2 BRKR,27,521013,2 AOS,22,512410,-5 Average,25.75,506804,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $507 million. That figure was $551 million in GIL's case. Fortune Brands Home & Security Inc (NYSE:FBHS) is the most popular stock in this table. On the other hand A. O. Smith Corporation (NYSE:AOS) is the least popular one with only 22 bullish hedge fund positions. Gildan Activewear Inc (NYSE:GIL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately GIL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GIL investors were disappointed as the stock returned -7.9% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.