In this article we are going to use hedge fund sentiment as a tool and determine whether V.F. Corporation (NYSE:VFC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is VFC a good stock to buy now? V.F. Corporation (NYSE:VFC) shareholders have witnessed a decrease in hedge fund interest of late. V.F. Corporation (NYSE:VFC) was in 22 hedge funds' portfolios at the end of September. The all time high for this statistic is 36. Our calculations also showed that VFC 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.
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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Peter Rathjens of Arrowstreet Capital
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 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 take a look at the new hedge fund action encompassing V.F. Corporation (NYSE:VFC).
Do Hedge Funds Think VFC Is A Good Stock To Buy Now?
At third quarter's end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VFC over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Diamond Hill Capital, managed by Ric Dillon, holds the largest position in V.F. Corporation (NYSE:VFC). Diamond Hill Capital has a $337.5 million position in the stock, comprising 1.9% of its 13F portfolio. On Diamond Hill Capital's heels is Alyeska Investment Group, managed by Anand Parekh, which holds a $42 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions consist of Alexander Mitchell's Scopus Asset Management, and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Diamond Hill Capital allocated the biggest weight to V.F. Corporation (NYSE:VFC), around 1.86% of its 13F portfolio. Six Columns Capital is also relatively very bullish on the stock, dishing out 1.37 percent of its 13F equity portfolio to VFC.
Due to the fact that V.F. Corporation (NYSE:VFC) has faced declining sentiment from the aggregate hedge fund industry, we can see that there is a sect of hedgies who sold off their full holdings last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, valued at close to $117.4 million in stock. Renaissance Technologies, also dumped its stock, about $29.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds last quarter.
Let's now review hedge fund activity in other stocks similar to V.F. Corporation (NYSE:VFC). These stocks are Waste Connections, Inc. (NYSE:WCN), Ball Corporation (NYSE:BLL), Otis Worldwide Corporation (NYSE:OTIS), Manulife Financial Corporation (NYSE:MFC), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), Wipro Limited (NYSE:WIT), and Motorola Solutions Inc (NYSE:MSI). This group of stocks' market caps are similar to VFC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WCN,32,544857,-7 BLL,33,932801,-5 OTIS,53,2224926,-3 MFC,21,196746,2 WLTW,51,2617710,2 WIT,9,93034,2 MSI,29,873220,-7 Average,32.6,1069042,-2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $1069 million. That figure was $458 million in VFC's case. Otis Worldwide Corporation (NYSE:OTIS) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 9 bullish hedge fund positions. V.F. Corporation (NYSE:VFC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VFC is 33.1. 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 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on VFC as the stock returned 22.7% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Get real-time email alerts: Follow V F Corp (NYSE:VFC)
Disclosure: None. This article was originally published at Insider Monkey.