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Were Hedge Funds Right About Capri Holdings (CPRI)?

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·6 min read
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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Capri Holdings Limited (NYSE:CPRI), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is Capri Holdings Limited (NYSE:CPRI) a healthy stock for your portfolio? The best stock pickers were becoming hopeful. The number of long hedge fund bets inched up by 6 in recent months. Capri Holdings Limited (NYSE:CPRI) was in 42 hedge funds' portfolios at the end of December. The all time high for this statistic is 47. Our calculations also showed that CPRI isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 36 hedge funds in our database with CPRI positions at the end of the third quarter.

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.

Parag Vora - HG Vora Capital
Parag Vora - HG Vora Capital

Parag Vora of HG Vora 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 analyze the recent hedge fund action regarding Capri Holdings Limited (NYSE:CPRI).

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

At Q4's end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. On the other hand, there were a total of 40 hedge funds with a bullish position in CPRI 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.

Is CPRI A Good Stock To Buy?
Is CPRI A Good Stock To Buy?

Among these funds, Rima Senvest Management held the most valuable stake in Capri Holdings Limited (NYSE:CPRI), which was worth $152.4 million at the end of the fourth quarter. On the second spot was HG Vora Capital Management which amassed $130.2 million worth of shares. Citadel Investment Group, Arrowstreet Capital, and Eminence Capital 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 HG Vora Capital Management allocated the biggest weight to Capri Holdings Limited (NYSE:CPRI), around 10.09% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, designating 5.95 percent of its 13F equity portfolio to CPRI.

As industrywide interest jumped, key money managers were breaking ground themselves. HG Vora Capital Management, managed by Parag Vora, initiated the biggest position in Capri Holdings Limited (NYSE:CPRI). HG Vora Capital Management had $130.2 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin's Senator Investment Group also initiated a $32.6 million position during the quarter. The other funds with brand new CPRI positions are Jeff Osher's No Street Capital, Alexander Mitchell's Scopus Asset Management, and Brad Stephens's Six Columns Capital.

Let's check out hedge fund activity in other stocks similar to Capri Holdings Limited (NYSE:CPRI). We will take a look at CDK Global Inc (NASDAQ:CDK), Reynolds Consumer Products Inc. (NASDAQ:REYN), CACI International Inc (NYSE:CACI), Cyberark Software Ltd (NASDAQ:CYBR), Jefferies Financial Group Inc. (NYSE:JEF), Blueprint Medicines Corporation (NASDAQ:BPMC), and Grupo Aeroportuario del Pacifico (NYSE:PAC). This group of stocks' market values match CPRI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDK,27,392132,-1 REYN,18,228024,0 CACI,28,512915,-3 CYBR,27,455087,2 JEF,33,700199,0 BPMC,38,1246182,4 PAC,4,120455,-2 Average,25,522142,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $522 million. That figure was $921 million in CPRI's case. Blueprint Medicines Corporation (NASDAQ:BPMC) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Pacifico (NYSE:PAC) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Capri Holdings Limited (NYSE:CPRI) is more popular among hedge funds. Our overall hedge fund sentiment score for CPRI is 86.8. 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 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 CPRI as the stock returned 31.1% 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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