At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards G-III Apparel Group, Ltd. (NASDAQ:GIII).
G-III Apparel Group, Ltd. (NASDAQ:GIII) has seen a decrease in hedge fund sentiment of late. GIII was in 17 hedge funds' portfolios at the end of March. There were 19 hedge funds in our database with GIII holdings at the end of the previous quarter. Our calculations also showed that GIII isn't among the 30 most popular stocks among hedge funds (click for Q1 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_258236" align="aligncenter" width="399"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's view the key hedge fund action regarding G-III Apparel Group, Ltd. (NASDAQ:GIII).
How are hedge funds trading G-III Apparel Group, Ltd. (NASDAQ:GIII)?
At Q1's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards GIII over the last 18 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in G-III Apparel Group, Ltd. (NASDAQ:GIII) was held by Candlestick Capital Management, which reported holding $11.9 million worth of stock at the end of September. It was followed by Millennium Management with a $8.7 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Royce & Associates. In terms of the portfolio weights assigned to each position Candlestick Capital Management allocated the biggest weight to G-III Apparel Group, Ltd. (NASDAQ:GIII), around 0.5% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, dishing out 0.27 percent of its 13F equity portfolio to GIII.
Because G-III Apparel Group, Ltd. (NASDAQ:GIII) has faced bearish sentiment from the smart money, it's easy to see that there exists a select few fund managers that decided to sell off their positions entirely heading into Q4. Interestingly, Alexander Mitchell's Scopus Asset Management sold off the biggest position of the "upper crust" of funds followed by Insider Monkey, comprising about $22.6 million in stock, and Andrew Rechtschaffen's AREX Capital Management was right behind this move, as the fund cut about $8 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 2 funds heading into Q4.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as G-III Apparel Group, Ltd. (NASDAQ:GIII) but similarly valued. These stocks are Tejon Ranch Company (NYSE:TRC), Pope Resources, A Delaware Limited Partnership (NASDAQ:POPE), Avadel Pharmaceuticals plc (NASDAQ:AVDL), and Barings BDC, Inc. (NYSE:BBDC). This group of stocks' market caps are similar to GIII's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TRC,11,50064,-3 POPE,5,4629,3 AVDL,16,112713,6 BBDC,7,16743,-3 Average,9.75,46037,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $46 million. That figure was $45 million in GIII's case. Avadel Pharmaceuticals plc (NASDAQ:AVDL) is the most popular stock in this table. On the other hand Pope Resources, A Delaware Limited Partnership (NASDAQ:POPE) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks G-III Apparel Group, Ltd. (NASDAQ:GIII) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on GIII as the stock returned 72.7% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.