In this article we will check out the progression of hedge fund sentiment towards Foot Locker, Inc. (NYSE:FL) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Foot Locker, Inc. (NYSE:FL) investors should be aware of a decrease in hedge fund interest of late. FL was in 21 hedge funds' portfolios at the end of March. There were 29 hedge funds in our database with FL positions at the end of the previous quarter. Our calculations also showed that FL 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 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 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 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.
[caption id="attachment_339612" align="aligncenter" width="399"] Kerr Neilson of Platinum Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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. Now we're going to go over the latest hedge fund action surrounding Foot Locker, Inc. (NYSE:FL).
What have hedge funds been doing with Foot Locker, Inc. (NYSE:FL)?
Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -28% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FL over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey's hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Foot Locker, Inc. (NYSE:FL). AQR Capital Management has a $54.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $26 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers with similar optimism comprise John W. Rogers's Ariel Investments, Israel Englander's Millennium Management and Kerr Neilson's Platinum Asset Management. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to Foot Locker, Inc. (NYSE:FL), around 1.04% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, dishing out 0.39 percent of its 13F equity portfolio to FL.
Seeing as Foot Locker, Inc. (NYSE:FL) has experienced bearish sentiment from hedge fund managers, it's safe to say that there were a few hedgies that decided to sell off their positions entirely by the end of the first quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital cut the biggest position of the "upper crust" of funds followed by Insider Monkey, worth an estimated $74.9 million in stock, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors was right behind this move, as the fund sold off about $22.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 8 funds by the end of the first quarter.
Let's now review hedge fund activity in other stocks similar to Foot Locker, Inc. (NYSE:FL). We will take a look at South Jersey Industries Inc (NYSE:SJI), Marriott Vacations Worldwide Corporation (NYSE:VAC), UFP Industries, Inc. (NASDAQ:UFPI), and NCR Corporation (NYSE:NCR). All of these stocks' market caps are closest to FL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SJI,13,88904,-5 VAC,25,299416,0 UFPI,17,67371,-10 NCR,32,155675,0 Average,21.75,152842,-3.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $147 million in FL's case. NCR Corporation (NYSE:NCR) is the most popular stock in this table. On the other hand South Jersey Industries Inc (NYSE:SJI) is the least popular one with only 13 bullish hedge fund positions. Foot Locker, Inc. (NYSE:FL) is not the least popular stock in this group but hedge fund interest is still below average. 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 gained 12.2% in 2020 through June 17th and still beat the market by 14.8 percentage points. A small number of hedge funds were also right about betting on FL as the stock returned 34.1% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.