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Is SKX Stock A Buy or Sell?

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Asma UL Husna
·5 min read
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In this article you are going to find out whether hedge funds think Skechers USA Inc (NYSE:SKX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is SKX stock a buy? Skechers USA Inc (NYSE:SKX) was in 31 hedge funds' portfolios at the end of December. The all time high for this statistic is 36. SKX has experienced an increase in enthusiasm from smart money recently. There were 28 hedge funds in our database with SKX holdings at the end of September. Our calculations also showed that SKX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here).

Ian Wace Marshall Wace
Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. 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. With all of this in mind we're going to view the latest hedge fund action surrounding Skechers USA Inc (NYSE:SKX).

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

At Q4's end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in SKX a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Skechers USA Inc (NYSE:SKX) was held by Southpoint Capital Advisors, which reported holding $145 million worth of stock at the end of December. It was followed by Tremblant Capital with a $143.2 million position. Other investors bullish on the company included Marshall Wace LLP, Balyasny Asset Management, and Millennium Management. In terms of the portfolio weights assigned to each position Intrepid Capital Management allocated the biggest weight to Skechers USA Inc (NYSE:SKX), around 4.55% of its 13F portfolio. Tremblant Capital is also relatively very bullish on the stock, dishing out 4.04 percent of its 13F equity portfolio to SKX.

Consequently, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the largest position in Skechers USA Inc (NYSE:SKX). Balyasny Asset Management had $31.2 million invested in the company at the end of the quarter. Nicholas Bagnall's Te Ahumairangi Investment Management also initiated a $5.1 million position during the quarter. The other funds with brand new SKX positions are Michael O'Keefe's 12th Street Asset Management, Benjamin A. Smith's Laurion Capital Management, and Peter Algert's Algert Global.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Skechers USA Inc (NYSE:SKX) but similarly valued. These stocks are TCF Financial Corporation (NASDAQ:TCF), Texas Pacific Land Corporation (NYSE:TPL), Marriott Vacations Worldwide Corporation (NYSE:VAC), Helen of Troy Limited (NASDAQ:HELE), Harley-Davidson, Inc. (NYSE:HOG), Vontier Corporation (NYSE:VNT), and First Citizens BancShares Inc. (NASDAQ:FCNCA). This group of stocks' market values are similar to SKX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TCF,14,230307,3 TPL,11,1196136,-2 VAC,21,509101,4 HELE,19,199444,-8 HOG,35,692906,3 VNT,36,590260,36 FCNCA,27,351075,6 Average,23.3,538461,6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.3 hedge funds with bullish positions and the average amount invested in these stocks was $538 million. That figure was $573 million in SKX's case. Vontier Corporation (NYSE:VNT) is the most popular stock in this table. On the other hand Texas Pacific Land Corporation (NYSE:TPL) is the least popular one with only 11 bullish hedge fund positions. Skechers USA Inc (NYSE:SKX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SKX is 73.8. 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 gained 12.2% in 2021 through April 12th and still beat the market by 1.5 percentage points. Hedge funds were also right about betting on SKX as the stock returned 22.7% since the end of Q4 (through 4/12) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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