In this article we will check out the progression of hedge fund sentiment towards Capri Holdings Limited (NYSE:CPRI) 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.
Is Capri Holdings Limited (NYSE:CPRI) an outstanding investment today? Money managers are selling. The number of long hedge fund positions went down by 11 lately. Our calculations also showed that CPRI 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). CPRI was in 29 hedge funds' portfolios at the end of the first quarter of 2020. There were 40 hedge funds in our database with CPRI positions at the end of the previous quarter. 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_26092" align="aligncenter" width="400"] Joel Greenblatt of Gotham Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, 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 are checking out investment opportunities like these. 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. With all of this in mind we're going to view the new hedge fund action surrounding Capri Holdings Limited (NYSE:CPRI).
How are hedge funds trading Capri Holdings Limited (NYSE:CPRI)?
Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CPRI over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
According to Insider Monkey's hedge fund database, Ricky Sandler's Eminence Capital has the number one position in Capri Holdings Limited (NYSE:CPRI), worth close to $149 million, amounting to 1.6% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $41.4 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism comprise Mike Masters's Masters Capital Management, Richard Mashaal's Rima Senvest Management and Jacob Mitchell's Antipodes Partners. In terms of the portfolio weights assigned to each position Proxima Capital Management allocated the biggest weight to Capri Holdings Limited (NYSE:CPRI), around 9.17% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, dishing out 2.18 percent of its 13F equity portfolio to CPRI.
Judging by the fact that Capri Holdings Limited (NYSE:CPRI) has witnessed a decline in interest from the smart money, we can see that there exists a select few hedgies who sold off their positions entirely heading into Q4. It's worth mentioning that Alexander Roepers's Atlantic Investment Management cut the biggest investment of the 750 funds monitored by Insider Monkey, worth an estimated $51.1 million in stock, and Alok Agrawal's Bloom Tree Partners was right behind this move, as the fund dumped about $24 million worth. These transactions are interesting, as total hedge fund interest fell by 11 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to Capri Holdings Limited (NYSE:CPRI). These stocks are Boyd Gaming Corporation (NYSE:BYD), Fox Factory Holding Corp (NASDAQ:FOXF), Bottomline Technologies (NASDAQ:EPAY), and Goosehead Insurance, Inc. (NASDAQ:GSHD). This group of stocks' market caps match CPRI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BYD,26,179093,-4 FOXF,10,15115,-3 EPAY,18,73371,1 GSHD,11,62673,2 Average,16.25,82563,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $280 million in CPRI's case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand Fox Factory Holding Corp (NASDAQ:FOXF) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Capri Holdings Limited (NYSE:CPRI) 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 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on CPRI as the stock returned 39.4% so far in Q2 (through the end of May) 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.