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Hedge Funds Are Betting On Hanesbrands Inc. (HBI)

·6 min read

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Hanesbrands Inc. (NYSE:HBI) changed recently.

Hanesbrands Inc. (NYSE:HBI) has experienced an increase in support from the world's most elite money managers recently. Hanesbrands Inc. (NYSE:HBI) was in 33 hedge funds' portfolios at the end of June. The all time high for this statistic is 42. There were 32 hedge funds in our database with HBI positions at the end of the first quarter. Our calculations also showed that HBI isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.

Ian Wace Marshall Wace
Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Keeping this in mind we're going to analyze the key hedge fund action regarding Hanesbrands Inc. (NYSE:HBI).

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

Heading into the third quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in HBI a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ric Dillon's Diamond Hill Capital has the number one position in Hanesbrands Inc. (NYSE:HBI), worth close to $395.4 million, corresponding to 1.5% of its total 13F portfolio. Sitting at the No. 2 spot is Andrew Wellington and Jeff Keswin of Lyrical Asset Management, with a $240.1 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Ken Griffin's Citadel Investment Group and Brandon Haley's Holocene Advisors. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Hanesbrands Inc. (NYSE:HBI), around 4.91% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, dishing out 2.91 percent of its 13F equity portfolio to HBI.

Consequently, some big names have been driving this bullishness. Armistice Capital, managed by Steven Boyd, created the most outsized position in Hanesbrands Inc. (NYSE:HBI). Armistice Capital had $14.9 million invested in the company at the end of the quarter. Brad Stephens's Six Columns Capital also initiated a $8.2 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace LLP, Brian Scudieri's Kehrs Ridge Capital, and Steve Cohen's Point72 Asset Management.

Let's now take a look at hedge fund activity in other stocks similar to Hanesbrands Inc. (NYSE:HBI). We will take a look at Planet Fitness Inc (NYSE:PLNT), Twist Bioscience Corporation (NASDAQ:TWST), Performance Food Group Company (NYSE:PFGC), MSA Safety Incorporated (NYSE:MSA), Coherent, Inc. (NASDAQ:COHR), Manpowergroup Inc (NYSE:MAN), and MicroStrategy Incorporated (NASDAQ:MSTR). This group of stocks' market valuations are similar to HBI's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PLNT,34,1174885,-6 TWST,23,1156581,-1 PFGC,41,734340,23 MSA,13,34128,-4 COHR,43,1525189,2 MAN,27,343953,1 MSTR,16,91795,-4 Average,28.1,722982,1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $723 million. That figure was $971 million in HBI's case. Coherent, Inc. (NASDAQ:COHR) is the most popular stock in this table. On the other hand MSA Safety Incorporated (NYSE:MSA) is the least popular one with only 13 bullish hedge fund positions. Hanesbrands Inc. (NYSE:HBI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for HBI is 62.9. 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately HBI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on HBI were disappointed as the stock returned -9.1% since the end of June (through 10/15) 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 many of these stocks already outperformed the market since 2019.

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