Before putting in our own effort and resources into finding a good investment, we can quickly utilize hedge fund expertise to give us a quick glimpse of whether that stock could make for a good addition to our portfolios. The odds are not exactly stacked in investors' favor when it comes to beating the market, as evidenced by the fact that less than 49% of the stocks in the S&P 500 did so during the second quarter. The stats were even worse in recent years when most of the advances in the market were due to large gains by FAANG stocks. However, one bright side for individual investors was the strong performance of hedge funds' top consensus picks. This year hedge funds' top 20 stock picks outperformed the S&P 500 Index by 6.6 percentage points through May 30th. Thus, we can see that the tireless research and efforts of hedge funds to identify winning stocks can work to our advantage when we know how to use the data. While not all of their picks will be winners, our odds are much better following their best stock picks than trying to go it alone.
Hibbett Sports, Inc. (NASDAQ:HIBB) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds' portfolios at the end of March. At the end of this article we will also compare HIBB to other stocks including America First Multifamily Investors, L.P. (NASDAQ:ATAX), Calix Inc (NYSE:CALX), and Diamond S Shipping Inc. (NYSE:DSSI) to get a better sense of its popularity.
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' 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 analyze the latest hedge fund action encompassing Hibbett Sports, Inc. (NASDAQ:HIBB).
How have hedgies been trading Hibbett Sports, Inc. (NASDAQ:HIBB)?
At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HIBB over the last 15 quarters. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey's hedge fund database, D E Shaw, managed by D. E. Shaw, holds the most valuable position in Hibbett Sports, Inc. (NASDAQ:HIBB). D E Shaw has a $21.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Renaissance Technologies, managed by Jim Simons, which holds a $19.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Paul Marshall and Ian Wace's Marshall Wace LLP, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Cliff Asness's AQR Capital Management.
Since Hibbett Sports, Inc. (NASDAQ:HIBB) has experienced a decline in interest from hedge fund managers, we can see that there lies a certain "tier" of hedge funds who sold off their entire stakes by the end of the third quarter. At the top of the heap, Gabriel Plotkin's Melvin Capital Management dropped the biggest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $10 million in stock. Ken Griffin's fund, Citadel Investment Group, also cut its stock, about $2.2 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now take a look at hedge fund activity in other stocks similar to Hibbett Sports, Inc. (NASDAQ:HIBB). These stocks are America First Multifamily Investors, L.P. (NASDAQ:ATAX), Calix Inc (NYSE:CALX), Diamond S Shipping Inc. (NYSE:DSSI), and Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN). All of these stocks' market caps match HIBB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATAX,2,1764,1 CALX,17,102157,3 DSSI,7,104295,7 ACHN,14,79338,-4 Average,10,71889,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $114 million in HIBB's case. Calix Inc (NYSE:CALX) is the most popular stock in this table. On the other hand America First Multifamily Investors, L.P. (NASDAQ:ATAX) is the least popular one with only 2 bullish hedge fund positions. Hibbett Sports, Inc. (NASDAQ:HIBB) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately HIBB wasn't nearly as popular as these 20 stocks and hedge funds that were betting on HIBB were disappointed as the stock returned -14.4% 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.