We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds' top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Naked Brand Group Limited (NASDAQ:NAKD).
Naked Brand Group Limited (NASDAQ:NAKD) shares haven't seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of the third quarter of 2019. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Summer Infant, Inc. (NASDAQ:SUMR), Medigus Ltd. (NASDAQ:MDGS), and Advaxis, Inc. (NASDAQ:ADXS) to gather more data points. Our calculations also showed that NAKD isn't among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_27480" align="aligncenter" width="450"] Israel Englander of Millennium Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to review the latest hedge fund action encompassing Naked Brand Group Limited (NASDAQ:NAKD).
What does smart money think about Naked Brand Group Limited (NASDAQ:NAKD)?
At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in NAKD a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Naked Brand Group Limited (NASDAQ:NAKD), which was worth $0.1 million at the end of the third quarter. On the second spot was Maso Capital which amassed $0.1 million worth of shares. Millennium Management was 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 Maso Capital allocated the biggest weight to Naked Brand Group Limited (NASDAQ:NAKD), around 0.03% of its portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0001 percent of its 13F equity portfolio to NAKD.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Naked Brand Group Limited (NASDAQ:NAKD) but similarly valued. We will take a look at Summer Infant, Inc. (NASDAQ:SUMR), Medigus Ltd. (NASDAQ:MDGS), Advaxis, Inc. (NASDAQ:ADXS), and Reebonz Holding Limited (NASDAQ:RBZ). This group of stocks' market caps match NAKD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SUMR,4,2542,1 MDGS,4,1004,0 ADXS,6,1082,2 RBZ,1,13,0 Average,3.75,1160,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.75 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $0 million in NAKD's case. Advaxis, Inc. (NASDAQ:ADXS) is the most popular stock in this table. On the other hand Reebonz Holding Limited (NASDAQ:RBZ) is the least popular one with only 1 bullish hedge fund positions. Naked Brand Group Limited (NASDAQ:NAKD) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately NAKD wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); NAKD investors were disappointed as the stock returned -1.2% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
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