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Here is What Hedge Funds Think About Urban Outfitters, Inc. (URBN)

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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Urban Outfitters, Inc. (NASDAQ:URBN).

Urban Outfitters, Inc. (NASDAQ:URBN) investors should pay attention to an increase in hedge fund interest recently. Urban Outfitters, Inc. (NASDAQ:URBN) was in 28 hedge funds' portfolios at the end of June. The all time high for this statistic is 34. Our calculations also showed that URBN isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Billionaire Ken Griffin's Top 10 Stocks Holdings
Billionaire Ken Griffin's Top 10 Stocks Holdings

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let's check out the latest hedge fund action encompassing Urban Outfitters, Inc. (NASDAQ:URBN).

Do Hedge Funds Think URBN Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards URBN over the last 24 quarters. With the smart money's sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is URBN A Good Stock To Buy?
Is URBN A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital has the number one position in Urban Outfitters, Inc. (NASDAQ:URBN), worth close to $65 million, amounting to 0.1% of its total 13F portfolio. The second largest stake is held by Samlyn Capital, managed by Robert Pohly, which holds a $35.2 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other professional money managers that are bullish contain Steven Boyd's Armistice Capital, Paul Marshall and Ian Wace's Marshall Wace LLP and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position MIK Capital allocated the biggest weight to Urban Outfitters, Inc. (NASDAQ:URBN), around 4.55% of its 13F portfolio. Samlyn Capital is also relatively very bullish on the stock, designating 0.52 percent of its 13F equity portfolio to URBN.

With a general bullishness amongst the heavyweights, key money managers have jumped into Urban Outfitters, Inc. (NASDAQ:URBN) headfirst. Armistice Capital, managed by Steven Boyd, assembled the most valuable position in Urban Outfitters, Inc. (NASDAQ:URBN). Armistice Capital had $23.2 million invested in the company at the end of the quarter. Jack Woodruff's Candlestick Capital Management also made a $10.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, Dmitry Balyasny's Balyasny Asset Management, and Renaissance Technologies.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Urban Outfitters, Inc. (NASDAQ:URBN) but similarly valued. These stocks are Evoqua Water Technologies Corp. (NYSE:AQUA), SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), LGI Homes Inc (NASDAQ:LGIH), Viavi Solutions Inc (NASDAQ:VIAV), Cerence Inc. (NASDAQ:CRNC), Parsons Corporation (NYSE:PSN), and Companhia Energetica Minas Gerais (NYSE:CIG). All of these stocks' market caps are similar to URBN's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AQUA,22,400433,-1 SWTX,18,1337621,-4 LGIH,17,55924,1 VIAV,24,233675,-4 CRNC,21,185310,1 PSN,9,18808,0 CIG,15,108359,2 Average,18,334304,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $233 million in URBN's case. Viavi Solutions Inc (NASDAQ:VIAV) is the most popular stock in this table. On the other hand Parsons Corporation (NYSE:PSN) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Urban Outfitters, Inc. (NASDAQ:URBN) is more popular among hedge funds. Our overall hedge fund sentiment score for URBN is 84.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Unfortunately URBN wasn't nearly as popular as these 5 stocks and hedge funds that were betting on URBN were disappointed as the stock returned -26.6% since the end of the second quarter (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.