Does Crocs, Inc. (CROX) Represent a Good Investment?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Crocs, Inc. (NASDAQ:CROX).

Crocs, Inc. (NASDAQ:CROX) was included in the 13F portfolios of 10 funds from our database at the end of September. CROX has seen an increase in hedge fund sentiment last quarter, as there had been eight funds bullish on the stock a quarter earlier. At the end of this article we will also compare CROX to other stocks including CTS Corporation (NYSE:CTS), Nuveen Floating Rate Income Fund (NYSE:JFR), and Century Aluminum Co (NASDAQ:CENX) to get a better sense of its popularity.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Now, we’re going to take a look at the key action surrounding Crocs, Inc. (NASDAQ:CROX).

How have hedgies been trading Crocs, Inc. (NASDAQ:CROX)?

At the end of the third quarter, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, which represents an increase of 25% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CROX over the last five quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Thomas Ellis and Todd Hammer’s North Run Capital has the largest position in Crocs, Inc. (NASDAQ:CROX), worth close to $16.4 million, accounting for 2.6% of its total 13F portfolio. On North Run Capital’s heels is Citadel Investment Group, led by Ken Griffin, which holds a $6.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish contain Renaissance Technologies, one of the largest hedge funds in the world, and David E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Israel Englander’s Millennium Management initiated the largest position in Crocs, Inc. (NASDAQ:CROX). Millennium Management had $4.4 million invested in the company at the end of the quarter. Mike Vranos’ Ellington also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new CROX investors: Matthew Tewksbury’s Stevens Capital Management, Paul Tudor Jones’ Tudor Investment Corp, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Crocs, Inc. (NASDAQ:CROX) but similarly valued. These stocks are CTS Corporation (NYSE:CTS), Nuveen Floating Rate Income Fund (NYSE:JFR), Century Aluminum Co (NASDAQ:CENX), and Viate Pharmaceuticals Inc (NASDAQ:VTAE). This group of stocks’ market valuations are closest to CROX’s market valuation.

As you can see these stocks had an average of 10 funds with bullish positions and the average amount invested in these stocks was $72 million, which is higher than the $37 million figure in CROX’s case. Viate Pharmaceuticals Inc (NASDAQ:VTAE) is the most popular stock in this table. On the other hand CTS Corporation (NYSE:CTS) is the least popular one with only four funds holding shares. Crocs, Inc. (NASDAQ:CROX) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Viate Pharmaceuticals Inc (NASDAQ:VTAE) might be a better candidate to consider taking a long position in.

Disclosure: none