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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Stitch Fix, Inc. (NASDAQ:SFIX) changed recently.
Is SFIX stock a buy? Stitch Fix, Inc. (NASDAQ:SFIX) investors should be aware of an increase in support from the world's most elite money managers in recent months. Stitch Fix, Inc. (NASDAQ:SFIX) was in 32 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SFIX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Bill Miller of Miller Value Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x 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. Keeping this in mind let's review the recent hedge fund action regarding Stitch Fix, Inc. (NASDAQ:SFIX).
Do Hedge Funds Think SFIX Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28% from the third quarter of 2020. On the other hand, there were a total of 28 hedge funds with a bullish position in SFIX a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Stitch Fix, Inc. (NASDAQ:SFIX) was held by Slate Path Capital, which reported holding $132.9 million worth of stock at the end of December. It was followed by Miller Value Partners with a $124.3 million position. Other investors bullish on the company included D E Shaw, Coatue Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Marathon Partners allocated the biggest weight to Stitch Fix, Inc. (NASDAQ:SFIX), around 10.25% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, earmarking 7.19 percent of its 13F equity portfolio to SFIX.
As aggregate interest increased, key money managers have jumped into Stitch Fix, Inc. (NASDAQ:SFIX) headfirst. Coatue Management, managed by Philippe Laffont, initiated the most valuable position in Stitch Fix, Inc. (NASDAQ:SFIX). Coatue Management had $102.1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $47.6 million position during the quarter. The other funds with new positions in the stock are James Crichton's Hitchwood Capital Management, Brian Ashford-Russell and Tim Woolley's Polar Capital, and Noam Gottesman's GLG Partners.
Let's go over hedge fund activity in other stocks similar to Stitch Fix, Inc. (NASDAQ:SFIX). We will take a look at Clearway Energy, Inc. (NYSE:CWEN), AutoNation, Inc. (NYSE:AN), Vertiv Holdings Co (NYSE:VRT), Credit Acceptance Corp. (NASDAQ:CACC), Perrigo Co Plc (NASDAQ:PRGO), TopBuild Corp (NYSE:BLD), and Mattel, Inc. (NASDAQ:MAT). This group of stocks' market caps are similar to SFIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CWEN,22,286227,3 AN,23,586917,-10 VRT,50,1345343,-1 CACC,29,771364,0 PRGO,31,363463,2 BLD,19,42185,-2 MAT,25,858930,-1 Average,28.4,607776,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $608 million. That figure was $689 million in SFIX's case. Vertiv Holdings Co (NYSE:VRT) is the most popular stock in this table. On the other hand TopBuild Corp (NYSE:BLD) is the least popular one with only 19 bullish hedge fund positions. Stitch Fix, Inc. (NASDAQ:SFIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SFIX is 61. 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. 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 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 gained 12.2% in 2021 through April 12th and beat the market again by 1.5 percentage points. Unfortunately SFIX wasn't nearly as popular as these 30 stocks and hedge funds that were betting on SFIX were disappointed as the stock returned -13.6% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.