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Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Guess', Inc. (NYSE:GES).
Is Guess', Inc. (NYSE:GES) a superb investment now? The smart money was becoming hopeful. The number of bullish hedge fund bets went up by 1 lately. Guess', Inc. (NYSE:GES) was in 20 hedge funds' portfolios at the end of March. The all time high for this statistic is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GES isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David E. Shaw of D.E. Shaw
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Do Hedge Funds Think GES Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in GES 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.
When looking at the institutional investors followed by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the largest position in Guess', Inc. (NYSE:GES). D E Shaw has a $20.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $18.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish include Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners and Sander Gerber's Hudson Bay Capital Management. In terms of the portfolio weights assigned to each position Contrarius Investment Management allocated the biggest weight to Guess', Inc. (NYSE:GES), around 0.35% of its 13F portfolio. LMR Partners is also relatively very bullish on the stock, dishing out 0.19 percent of its 13F equity portfolio to GES.
Consequently, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the most valuable position in Guess', Inc. (NYSE:GES). Millennium Management had $18.7 million invested in the company at the end of the quarter. Parvinder Thiara's Athanor Capital also made a $5.7 million investment in the stock during the quarter. The following funds were also among the new GES investors: D. E. Shaw's D E Shaw, Peter Muller's PDT Partners, and Donald Sussman's Paloma Partners.
Let's check out hedge fund activity in other stocks similar to Guess', Inc. (NYSE:GES). These stocks are Luminex Corporation (NASDAQ:LMNX), Tennant Company (NYSE:TNC), Usa Compression Partners LP (NYSE:USAC), Heron Therapeutics Inc (NASDAQ:HRTX), Oxford Industries, Inc. (NYSE:OXM), Codexis, Inc. (NASDAQ:CDXS), and PMV Pharmaceuticals, Inc. (NASDAQ:PMVP). This group of stocks' market valuations resemble GES's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LMNX,25,231366,2 TNC,14,62656,1 USAC,2,6041,0 HRTX,14,211188,0 OXM,7,50002,0 CDXS,13,418036,-1 PMVP,21,697738,0 Average,13.7,239575,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $240 million. That figure was $98 million in GES's case. Luminex Corporation (NASDAQ:LMNX) is the most popular stock in this table. On the other hand Usa Compression Partners LP (NYSE:USAC) is the least popular one with only 2 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. Our overall hedge fund sentiment score for GES is 75.1. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately GES wasn't nearly as popular as these 5 stocks and hedge funds that were betting on GES were disappointed as the stock returned -4.3% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.