How do we determine whether YETI Holdings, Inc. (NYSE:YETI) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
YETI Holdings, Inc. (NYSE:YETI) has experienced a decrease in hedge fund sentiment lately. YETI was in 11 hedge funds' portfolios at the end of the third quarter of 2019. There were 12 hedge funds in our database with YETI holdings at the end of the previous quarter. Our calculations also showed that YETI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
[caption id="attachment_30614" align="aligncenter" width="600"] Howard Marks of Oaktree Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the key hedge fund action regarding YETI Holdings, Inc. (NYSE:YETI).
Hedge fund activity in YETI Holdings, Inc. (NYSE:YETI)
At Q3's end, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in YETI a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Oaktree Capital Management was the largest shareholder of YETI Holdings, Inc. (NYSE:YETI), with a stake worth $15.1 million reported as of the end of September. Trailing Oaktree Capital Management was Citadel Investment Group, which amassed a stake valued at $8.8 million. Shellback Capital, Arrowstreet Capital, and Driehaus 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 Shellback Capital allocated the biggest weight to YETI Holdings, Inc. (NYSE:YETI), around 0.72% of its 13F portfolio. Oaktree Capital Management is also relatively very bullish on the stock, setting aside 0.3 percent of its 13F equity portfolio to YETI.
Due to the fact that YETI Holdings, Inc. (NYSE:YETI) has witnessed a decline in interest from hedge fund managers, it's easy to see that there lies a certain "tier" of money managers that slashed their entire stakes heading into Q4. It's worth mentioning that Brad Dunkley and Blair Levinsky's Waratah Capital Advisors cut the largest stake of the "upper crust" of funds tracked by Insider Monkey, worth an estimated $3 million in stock, and Anand Parekh's Alyeska Investment Group was right behind this move, as the fund said goodbye to about $3 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q4.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as YETI Holdings, Inc. (NYSE:YETI) but similarly valued. We will take a look at Red Rock Resorts, Inc. (NASDAQ:RRR), Welbilt, Inc. (NYSE:WBT), Builders FirstSource, Inc. (NASDAQ:BLDR), and AU Optronics Corp. (NYSE:AUO). All of these stocks' market caps are closest to YETI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RRR,17,353606,1 WBT,26,792934,1 BLDR,36,499407,1 AUO,8,20810,1 Average,21.75,416689,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $47 million in YETI's case. Builders FirstSource, Inc. (NASDAQ:BLDR) is the most popular stock in this table. On the other hand AU Optronics Corp. (NYSE:AUO) is the least popular one with only 8 bullish hedge fund positions. YETI Holdings, Inc. (NYSE:YETI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on YETI as the stock returned 13.6% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.