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In this article we will check out the progression of hedge fund sentiment towards Skechers USA Inc (NYSE:SKX) 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.
Skechers USA Inc (NYSE:SKX) was in 29 hedge funds' portfolios at the end of March. The all time high for this statistic is 36. SKX investors should pay attention to a decrease in hedge fund sentiment lately. There were 31 hedge funds in our database with SKX holdings at the end of December. Our calculations also showed that SKX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Richard S. Pzena of Pzena Investment Management
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Do Hedge Funds Think SKX Is A Good Stock To Buy Now?
At the end of March, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in SKX over the last 23 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pzena Investment Management was the largest shareholder of Skechers USA Inc (NYSE:SKX), with a stake worth $162.3 million reported as of the end of March. Trailing Pzena Investment Management was Tremblant Capital, which amassed a stake valued at $123.2 million. Southpoint Capital Advisors, AQR Capital Management, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Plaisance Capital allocated the biggest weight to Skechers USA Inc (NYSE:SKX), around 5.57% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, designating 4.57 percent of its 13F equity portfolio to SKX.
Since Skechers USA Inc (NYSE:SKX) has witnessed falling interest from hedge fund managers, it's easy to see that there was a specific group of hedge funds who sold off their entire stakes in the first quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP dumped the largest position of the "upper crust" of funds watched by Insider Monkey, worth close to $103.2 million in stock, and Jeffrey Bronchick's Cove Street Capital was right behind this move, as the fund dumped about $14.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds in the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Skechers USA Inc (NYSE:SKX) but similarly valued. We will take a look at Plains All American Pipeline, L.P. (NYSE:PAA), Vir Biotechnology, Inc. (NASDAQ:VIR), SLM Corp (NASDAQ:SLM), Envista Holdings Corporation (NYSE:NVST), Woori Financial Group Inc. (NYSE:WF), MicroStrategy Incorporated (NASDAQ:MSTR), and The AZEK Company Inc. (NYSE:AZEK). This group of stocks' market valuations match SKX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PAA,7,57037,-3 VIR,9,17685,4 SLM,27,996426,8 NVST,34,889306,1 WF,2,3273,1 MSTR,20,132184,5 AZEK,29,252039,6 Average,18.3,335421,3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $335 million. That figure was $532 million in SKX's case. Envista Holdings Corporation (NYSE:NVST) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. Skechers USA Inc (NYSE:SKX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SKX is 69.4. 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. 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 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on SKX as the stock returned 21.5% since the end of Q1 (through 7/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.