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Hedge Funds Are Crazy About Stitch Fix, Inc. (SFIX)

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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Stitch Fix, Inc. (NASDAQ:SFIX), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Stitch Fix, Inc. (NASDAQ:SFIX) a buy right now? Investors who are in the know were getting more optimistic. The number of bullish hedge fund bets inched up by 7 in recent months. Stitch Fix, Inc. (NASDAQ:SFIX) was in 35 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 32. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SFIX isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech 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 let's analyze the new hedge fund action surrounding Stitch Fix, Inc. (NASDAQ:SFIX).

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

At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SFIX over the last 24 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Is SFIX A Good Stock To Buy?
Is SFIX A Good Stock To Buy?

The largest stake in Stitch Fix, Inc. (NASDAQ:SFIX) was held by D E Shaw, which reported holding $160.3 million worth of stock at the end of June. It was followed by Slate Path Capital with a $152.8 million position. Other investors bullish on the company included Coatue Management, Miller Value Partners, and Marathon Partners. In terms of the portfolio weights assigned to each position Marathon Partners allocated the biggest weight to Stitch Fix, Inc. (NASDAQ:SFIX), around 15.48% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, dishing out 8.54 percent of its 13F equity portfolio to SFIX.

As one would reasonably expect, key hedge funds were breaking ground themselves. 683 Capital Partners, managed by Ari Zweiman, initiated the most valuable position in Stitch Fix, Inc. (NASDAQ:SFIX). 683 Capital Partners had $23.2 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $14.6 million position during the quarter. The other funds with brand new SFIX positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Seth Fischer's Oasis Management, and Jeffrey Diehl's Adams Street Partners.

Let's now take a look at hedge fund activity in other stocks similar to Stitch Fix, Inc. (NASDAQ:SFIX). These stocks are BlackLine, Inc. (NASDAQ:BL), American Campus Communities, Inc. (NYSE:ACC), Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC), Affiliated Managers Group, Inc. (NYSE:AMG), DCP Midstream LP (NYSE:DCP), and Foot Locker, Inc. (NYSE:FL). This group of stocks' market caps are similar to SFIX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BL,20,266005,-4 ACC,21,222547,-5 RARE,32,770180,7 WSC,52,1399877,5 AMG,30,784733,4 DCP,3,31363,-1 FL,31,416162,3 Average,27,555838,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $703 million in SFIX's case. WillScot Mobile Mini Holdings Corp. (NASDAQ:WSC) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 3 bullish hedge fund positions. Stitch Fix, Inc. (NASDAQ:SFIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SFIX is 72.7. 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 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately SFIX wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SFIX were disappointed as the stock returned -45.5% since the end of June (through 10/11) 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.