At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not G-III Apparel Group, Ltd. (NASDAQ:GIII) makes for a good investment right now.
G-III Apparel Group, Ltd. (NASDAQ:GIII) was in 12 hedge funds' portfolios at the end of the third quarter of 2019. GIII investors should be aware of a decrease in hedge fund sentiment recently. There were 13 hedge funds in our database with GIII positions at the end of the previous quarter. Our calculations also showed that GIII isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to 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 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_193003" align="alignnone" width="600"] Chuck Royce of Royce & Associates[/caption]
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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the key hedge fund action regarding G-III Apparel Group, Ltd. (NASDAQ:GIII).
How are hedge funds trading G-III Apparel Group, Ltd. (NASDAQ:GIII)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in GIII a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of G-III Apparel Group, Ltd. (NASDAQ:GIII), with a stake worth $23.4 million reported as of the end of September. Trailing Royce & Associates was Kettle Hill Capital Management, which amassed a stake valued at $11.4 million. Millennium Management, Buckingham Capital Management, and Water Street Capital 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 Kettle Hill Capital Management allocated the biggest weight to G-III Apparel Group, Ltd. (NASDAQ:GIII), around 2.7% of its 13F portfolio. Buckingham Capital Management is also relatively very bullish on the stock, dishing out 1.13 percent of its 13F equity portfolio to GIII.
Seeing as G-III Apparel Group, Ltd. (NASDAQ:GIII) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies who were dropping their entire stakes by the end of the third quarter. It's worth mentioning that Steven Tananbaum's GoldenTree Asset Management dumped the largest position of the 750 funds followed by Insider Monkey, valued at an estimated $15.5 million in stock. Principal Global Investors's fund, Columbus Circle Investors, also sold off its stock, about $6 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to G-III Apparel Group, Ltd. (NASDAQ:GIII). We will take a look at Eldorado Gold Corp (NYSE:EGO), Gannett Co., Inc. (NYSE:GCI), Medifast, Inc. (NYSE:MED), and Futu Holdings Limited (NASDAQ:FHL). This group of stocks' market caps are similar to GIII's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EGO,13,137318,3 GCI,17,168832,3 MED,22,302026,3 FHL,1,538,-2 Average,13.25,152179,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $81 million in GIII's case. Medifast, Inc. (NYSE:MED) is the most popular stock in this table. On the other hand Futu Holdings Limited (NASDAQ:FHL) is the least popular one with only 1 bullish hedge fund positions. G-III Apparel Group, Ltd. (NASDAQ:GIII) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on GIII as the stock returned 14.9% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.