We at Insider Monkey have gone over 738 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article, we look at what those funds think of Callaway Golf Company (NYSE:ELY) based on that data.
Is Callaway Golf Company (NYSE:ELY) an excellent investment right now? Prominent investors are becoming more confident. The number of long hedge fund positions improved by 3 lately. Our calculations also showed that ELY isn't among the 30 most popular stocks among hedge funds. ELY was in 26 hedge funds' portfolios at the end of March. There were 23 hedge funds in our database with ELY positions at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a look at the fresh hedge fund action encompassing Callaway Golf Company (NYSE:ELY).
What does the smart money think about Callaway Golf Company (NYSE:ELY)?
At Q1's end, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the fourth quarter of 2018. On the other hand, there were a total of 17 hedge funds with a bullish position in ELY a year ago. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
The largest stake in Callaway Golf Company (NYSE:ELY) was held by Daruma Asset Management, which reported holding $24.9 million worth of stock at the end of March. It was followed by Marshall Wace LLP with a $19.2 million position. Other investors bullish on the company included Millennium Management, 1060 Capital Management, and Arrowstreet Capital.
Now, specific money managers were leading the bulls' herd. 1060 Capital Management, managed by Brian Gustavson and Andrew Haley, established the largest position in Callaway Golf Company (NYSE:ELY). 1060 Capital Management had $16.2 million invested in the company at the end of the quarter. Sander Gerber's Hudson Bay Capital Management also initiated a $4.3 million position during the quarter. The other funds with new positions in the stock are Peter Muller's PDT Partners, Steve Cohen's Point72 Asset Management, and Minhua Zhang's Weld Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Callaway Golf Company (NYSE:ELY) but similarly valued. We will take a look at Ebix Inc (NASDAQ:EBIX), Freshpet Inc (NASDAQ:FRPT), Eventbrite, Inc. (NYSE:EB), and Wageworks Inc (NYSE:WAGE). This group of stocks' market caps are similar to ELY's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EBIX,22,154046,4 FRPT,25,117770,4 EB,16,356225,8 WAGE,21,160164,8 Average,21,197051,6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $197 million. That figure was $145 million in ELY's case. Freshpet Inc (NASDAQ:FRPT) is the most popular stock in this table. On the other hand Eventbrite, Inc. (NYSE:EB) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Callaway Golf Company (NYSE:ELY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ELY wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ELY were disappointed as the stock returned -7.1% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.