Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of NIKE, Inc. (NYSE:NKE).
NIKE, Inc. (NYSE:NKE) investors should be aware of a decrease in support from the world's most elite money managers in recent months. NKE was in 80 hedge funds' portfolios at the end of March. There were 81 hedge funds in our database with NKE positions at the end of the previous quarter. Our calculations also showed that NKE 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 44 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_340081" align="aligncenter" width="400"] Phill Gross of Adage Capital Management[/caption]
At Insider Monkey 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 believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a glance at the new hedge fund action surrounding NIKE, Inc. (NYSE:NKE).
Hedge fund activity in NIKE, Inc. (NYSE:NKE)
Heading into the second quarter of 2020, a total of 80 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -1% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NKE 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.
Among these funds, Fisher Asset Management held the most valuable stake in NIKE, Inc. (NYSE:NKE), which was worth $487.6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $155.9 million worth of shares. AQR Capital Management, Ako Capital, and Adage Capital 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 Immersion Capital allocated the biggest weight to NIKE, Inc. (NYSE:NKE), around 9.03% of its 13F portfolio. Broad Peak Investment Holdings is also relatively very bullish on the stock, setting aside 8.59 percent of its 13F equity portfolio to NKE.
Because NIKE, Inc. (NYSE:NKE) has witnessed declining sentiment from the smart money, it's safe to say that there lies a certain "tier" of hedge funds who were dropping their entire stakes by the end of the third quarter. It's worth mentioning that Jack Woodruff's Candlestick Capital Management sold off the biggest stake of the "upper crust" of funds watched by Insider Monkey, comprising an estimated $77 million in stock, and Frank Brosens's Taconic Capital was right behind this move, as the fund said goodbye to about $60.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to NIKE, Inc. (NYSE:NKE). We will take a look at salesforce.com, inc. (NYSE:CRM), Bristol Myers Squibb Company (NYSE:BMY), Costco Wholesale Corporation (NASDAQ:COST), and McDonald's Corporation (NYSE:MCD). This group of stocks' market values are closest to NKE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CRM,117,7122915,5 BMY,126,6887128,4 COST,68,4351741,-2 MCD,66,953580,9 Average,94.25,4828841,4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 94.25 hedge funds with bullish positions and the average amount invested in these stocks was $4829 million. That figure was $2172 million in NKE's case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand McDonald's Corporation (NYSE:MCD) is the least popular one with only 66 bullish hedge fund positions. NIKE, Inc. (NYSE:NKE) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately NKE wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); NKE investors were disappointed as the stock returned 13.3% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.