The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Fossil Group Inc (NASDAQ:FOSL), and what that likely means for the prospects of the company and its stock.
Fossil Group Inc (NASDAQ:FOSL) investors should pay attention to a decrease in hedge fund sentiment lately. FOSL was in 17 hedge funds' portfolios at the end of March. There were 18 hedge funds in our database with FOSL positions at the end of the previous quarter. Our calculations also showed that FOSL isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a gander at the latest hedge fund action surrounding Fossil Group Inc (NASDAQ:FOSL).
What have hedge funds been doing with Fossil Group Inc (NASDAQ:FOSL)?
At Q1's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in FOSL a year ago. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the biggest position in Fossil Group Inc (NASDAQ:FOSL). Renaissance Technologies has a $27.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by D E Shaw, managed by D. E. Shaw, which holds a $17.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that hold long positions contain Joel Greenblatt's Gotham Asset Management, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Ken Griffin's Citadel Investment Group.
Seeing as Fossil Group Inc (NASDAQ:FOSL) has witnessed bearish sentiment from the smart money, it's easy to see that there was a specific group of money managers who sold off their full holdings heading into Q3. Interestingly, Matt Sirovich and Jeremy Mindich's Scopia Capital dumped the biggest position of the 700 funds watched by Insider Monkey, valued at about $6.2 million in stock, and Peter Muller's PDT Partners was right behind this move, as the fund said goodbye to about $2.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds heading into Q3.
Let's check out hedge fund activity in other stocks similar to Fossil Group Inc (NASDAQ:FOSL). We will take a look at Sabine Royalty Trust (NYSE:SBR), Rayonier Advanced Materials Inc (NYSE:RYAM), TG Therapeutics Inc (NASDAQ:TGTX), and Luxfer Holdings PLC (NYSE:LXFR). This group of stocks' market valuations match FOSL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SBR,6,24252,0 RYAM,24,142317,5 TGTX,17,182420,2 LXFR,14,115224,2 Average,15.25,116053,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $80 million in FOSL's case. Rayonier Advanced Materials Inc (NYSE:RYAM) is the most popular stock in this table. On the other hand Sabine Royalty Trust (NYSE:SBR) is the least popular one with only 6 bullish hedge fund positions. Fossil Group Inc (NASDAQ:FOSL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 FOSL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on FOSL were disappointed as the stock returned -27.9% 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 so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.