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Was The Smart Money Right About Piling Into Crocs, Inc. (CROX)?

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Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the fourth quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Crocs, Inc. (NASDAQ:CROX) based on that data.

Crocs, Inc. (NASDAQ:CROX) has seen an increase in hedge fund sentiment in recent months. Crocs, Inc. (NASDAQ:CROX) was in 41 hedge funds' portfolios at the end of December. The all time high for this statistic was previously 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CROX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Bernard Horn of Polaris Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we're going to take a peek at the key hedge fund action surrounding Crocs, Inc. (NASDAQ:CROX).

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

At Q4's end, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CROX over the last 22 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Crocs, Inc. (NASDAQ:CROX) was held by Renaissance Technologies, which reported holding $86.2 million worth of stock at the end of December. It was followed by Woodson Capital Management with a $58.9 million position. Other investors bullish on the company included Citadel Investment Group, Polaris Capital Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Crocs, Inc. (NASDAQ:CROX), around 3.83% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, earmarking 2.11 percent of its 13F equity portfolio to CROX.

As aggregate interest increased, key hedge funds have jumped into Crocs, Inc. (NASDAQ:CROX) headfirst. Maverick Capital, managed by Lee Ainslie, created the biggest position in Crocs, Inc. (NASDAQ:CROX). Maverick Capital had $6.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $5.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Brad Farber's Atika Capital, Michael Gelband's ExodusPoint Capital, and Sander Gerber's Hudson Bay Capital Management.

Let's go over hedge fund activity in other stocks similar to Crocs, Inc. (NASDAQ:CROX). These stocks are TechnipFMC plc (NYSE:FTI), Neogen Corporation (NASDAQ:NEOG), Foot Locker, Inc. (NYSE:FL), Upwork Inc. (NASDAQ:UPWK), Tenet Healthcare Corp (NYSE:THC), United Bankshares, Inc. (NASDAQ:UBSI), and Clean Harbors Inc (NYSE:CLH). This group of stocks' market caps match CROX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTI,35,545147,4 NEOG,16,49316,-2 FL,26,773968,0 UPWK,34,548991,7 THC,34,1210954,1 UBSI,9,86644,-10 CLH,22,308152,-2 Average,25.1,503310,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $503 million. That figure was $621 million in CROX's case. TechnipFMC plc (NYSE:FTI) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Crocs, Inc. (NASDAQ:CROX) is more popular among hedge funds. Our overall hedge fund sentiment score for CROX is 90. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on CROX as the stock returned 59.8% since the end of December (through 4/30) 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.

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