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Hedge funds don't get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don't realize is that 100% of the passive funds didn't see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Guess', Inc. (NYSE:GES).
Guess', Inc. (NYSE:GES) shares haven't seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged. The stock was in 20 hedge funds' portfolios at the end of the fourth quarter of 2019. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Hercules Technology Growth Capital Inc (NYSE:HTGC), Resideo Technologies, Inc. (NYSE:REZI), and U.S. Physical Therapy, Inc. (NYSE:USPH) to gather more data points. Our calculations also showed that GES isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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Paul Tudor Jones of Tudor Investment Corp[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with 77% accuracy, so we check out his stock picks. A former hedge fund manager is pitching the "next Amazon" in this video; again we are listening. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to analyze the new hedge fund action encompassing Guess', Inc. (NYSE:GES).
What does smart money think about Guess', Inc. (NYSE:GES)?
At Q4's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the third quarter of 2019. By comparison, 19 hedge funds held shares or bullish call options in GES a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Scopus Asset Management was the largest shareholder of Guess', Inc. (NYSE:GES), with a stake worth $43.6 million reported as of the end of September. Trailing Scopus Asset Management was D E Shaw, which amassed a stake valued at $22.1 million. Citadel Investment Group, Arrowstreet Capital, and Rima Senvest Management 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 Scopus Asset Management allocated the biggest weight to Guess', Inc. (NYSE:GES), around 1.42% of its 13F portfolio. Six Columns Capital is also relatively very bullish on the stock, dishing out 0.71 percent of its 13F equity portfolio to GES.
Because Guess', Inc. (NYSE:GES) has faced declining sentiment from the smart money, logic holds that there was a specific group of hedgies who were dropping their full holdings last quarter. At the top of the heap, Sander Gerber's Hudson Bay Capital Management said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, valued at about $1.9 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund sold off about $1.8 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Guess', Inc. (NYSE:GES) but similarly valued. These stocks are Hercules Capital, Inc. (NYSE:HTGC), Resideo Technologies, Inc. (NYSE:REZI), U.S. Physical Therapy, Inc. (NYSE:USPH), and La-Z-Boy Incorporated (NYSE:LZB). This group of stocks' market values resemble GES's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HTGC,13,36000,3 REZI,21,256012,-11 USPH,16,71923,3 LZB,21,87375,-4 Average,17.75,112828,-2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $118 million in GES's case. Resideo Technologies, Inc. (NYSE:REZI) is the most popular stock in this table. On the other hand Hercules Capital, Inc. (NYSE:HTGC) is the least popular one with only 13 bullish hedge fund positions. Guess', Inc. (NYSE:GES) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately GES wasn't nearly as popular as these 10 stocks and hedge funds that were betting on GES were disappointed as the stock returned -63.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.