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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Macy's, Inc. (NYSE:M) to find out whether there were any major changes in hedge funds' views.
Is Macy's (M) stock a buy? The smart money was taking an optimistic view. The number of bullish hedge fund bets moved up by 6 recently. Macy's, Inc. (NYSE:M) was in 34 hedge funds' portfolios at the end of December. The all time high for this statistic is 67. Our calculations also showed that M isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Donald Yacktman of Yacktman Asset Management
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Do Hedge Funds Think M Is A Good Stock To Buy Now?
At Q4's end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 21% from one quarter earlier. On the other hand, there were a total of 32 hedge funds with a bullish position in M a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Yacktman Asset Management held the most valuable stake in Macy's, Inc. (NYSE:M), which was worth $283 million at the end of the fourth quarter. On the second spot was Contrarius Investment Management which amassed $90.9 million worth of shares. Appaloosa Management LP, Renaissance Technologies, and Arrowstreet 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 Contrarius Investment Management allocated the biggest weight to Macy's, Inc. (NYSE:M), around 5.63% of its 13F portfolio. Yacktman Asset Management is also relatively very bullish on the stock, designating 3.5 percent of its 13F equity portfolio to M.
As aggregate interest increased, specific money managers have jumped into Macy's, Inc. (NYSE:M) headfirst. Appaloosa Management LP, managed by David Tepper, initiated the most outsized position in Macy's, Inc. (NYSE:M). Appaloosa Management LP had $72 million invested in the company at the end of the quarter. Renaissance Technologies also made a $70.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny's Balyasny Asset Management, Robert Pohly's Samlyn Capital, and Daniel Kretinsky's Vesa Equity Investment.
Let's check out hedge fund activity in other stocks similar to Macy's, Inc. (NYSE:M). These stocks are Jamf Holding Corp. (NASDAQ:JAMF), Norbord Inc. (NYSE:OSB), AAON, Inc. (NASDAQ:AAON), Equitrans Midstream Corporation (NYSE:ETRN), International Game Technology PLC (NYSE:IGT), Avnet, Inc. (NASDAQ:AVT), and Southwest Gas Holdings, Inc. (NYSE:SWX). All of these stocks' market caps are closest to M's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JAMF,26,2376513,11 OSB,15,225441,2 AAON,13,38412,-3 ETRN,25,407837,0 IGT,25,230817,-3 AVT,25,770471,-6 SWX,17,80763,1 Average,20.9,590036,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.9 hedge funds with bullish positions and the average amount invested in these stocks was $590 million. That figure was $798 million in M's case. Jamf Holding Corp. (NASDAQ:JAMF) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Macy's, Inc. (NYSE:M) is more popular among hedge funds. Our overall hedge fund sentiment score for M is 75.2. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7.9% in 2021 through April 1st but still managed to beat the market by 0.4 percentage points. Hedge funds were also right about betting on M as the stock returned 39.7% since the end of December (through 4/1) 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.
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Disclosure: None. This article was originally published at Insider Monkey.