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While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 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 Oxford Industries, Inc. (NYSE:OXM).
Is OXM a good stock to buy now? Oxford Industries, Inc. (NYSE:OXM) investors should pay attention to a decrease in hedge fund sentiment recently. Oxford Industries, Inc. (NYSE:OXM) was in 8 hedge funds' portfolios at the end of September. The all time high for this statistics is 23. There were 12 hedge funds in our database with OXM positions at the end of the second quarter. Our calculations also showed that OXM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 website. With all of this in mind we're going to analyze the fresh hedge fund action encompassing Oxford Industries, Inc. (NYSE:OXM).
What have hedge funds been doing with Oxford Industries, Inc. (NYSE:OXM)?
Heading into the fourth quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in OXM over the last 21 quarters. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Cardinal Capital was the largest shareholder of Oxford Industries, Inc. (NYSE:OXM), with a stake worth $24.1 million reported as of the end of September. Trailing Cardinal Capital was Arrowstreet Capital, which amassed a stake valued at $5.2 million. Millennium Management, D E Shaw, and Tudor Investment Corp 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 Cardinal Capital allocated the biggest weight to Oxford Industries, Inc. (NYSE:OXM), around 1.01% of its 13F portfolio. Tudor Investment Corp is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to OXM.
Seeing as Oxford Industries, Inc. (NYSE:OXM) has faced falling interest from the smart money, we can see that there is a sect of funds that elected to cut their positions entirely by the end of the third quarter. Interestingly, Dmitry Balyasny's Balyasny Asset Management cut the biggest position of the "upper crust" of funds followed by Insider Monkey, totaling close to $1.8 million in stock. Ken Griffin's fund, Citadel Investment Group, also cut its stock, about $0.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds by the end of the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Oxford Industries, Inc. (NYSE:OXM) but similarly valued. We will take a look at Tivity Health, Inc. (NASDAQ:TVTY), American Finance Trust, Inc. (NASDAQ:AFIN), Foundation Building Materials, Inc. (NYSE:FBM), SI-BONE, Inc. (NASDAQ:SIBN), Core Laboratories N.V. (NYSE:CLB), Inhibrx, Inc. (NASDAQ:INBX), and TCR2 Therapeutics Inc. (NASDAQ:TCRR). This group of stocks' market values are closest to OXM's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TVTY,17,233432,1 AFIN,11,8551,1 FBM,13,77199,4 SIBN,19,163493,3 CLB,16,113946,-3 INBX,10,177132,10 TCRR,13,179036,5 Average,14.1,136113,3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.1 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $34 million in OXM's case. SI-BONE, Inc. (NASDAQ:SIBN) is the most popular stock in this table. On the other hand Inhibrx, Inc. (NASDAQ:INBX) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Oxford Industries, Inc. (NYSE:OXM) is even less popular than INBX. Our overall hedge fund sentiment score for OXM is 11.4. 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. Hedge funds clearly dropped the ball on OXM as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on OXM as the stock returned 45.1% since Q3 (through December 2nd) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.