How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Gildan Activewear Inc (NYSE:GIL).
Is Gildan Activewear Inc (NYSE:GIL) a buy, sell, or hold? Investors who are in the know are getting more bullish. The number of long hedge fund positions improved by 3 lately. Our calculations also showed that GIL isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a look at the key hedge fund action regarding Gildan Activewear Inc (NYSE:GIL).
How have hedgies been trading Gildan Activewear Inc (NYSE:GIL)?
Heading into the fourth quarter of 2018, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GIL over the last 13 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, John Smith Clark’s Southpoint Capital Advisors has the largest position in Gildan Activewear Inc (NYSE:GIL), worth close to $96.2 million, amounting to 3.8% of its total 13F portfolio. Coming in second is D E Shaw, led by D. E. Shaw, holding a $43.7 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism contain Ken Griffin’s Citadel Investment Group, Martin D. Sass’s MD Sass and Gregg J. Powers’s Private Capital Management.
With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Southpoint Capital Advisors, managed by John Smith Clark, initiated the most valuable position in Gildan Activewear Inc (NYSE:GIL). Southpoint Capital Advisors had $96.2 million invested in the company at the end of the quarter. Martin D. Sass’s MD Sass also made a $29 million investment in the stock during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, Jim Simons’s Renaissance Technologies, and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Gildan Activewear Inc (NYSE:GIL) but similarly valued. We will take a look at EQGP Holdings, LP (NYSE:EQGP), CyrusOne Inc (NASDAQ:CONE), Phillips 66 Partners LP (NYSE:PSXP), and Polaris Industries Inc. (NYSE:PII). This group of stocks’ market caps resemble GIL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQGP | 5 | 23037 | 1 |
| CONE | 24 | 224805 | 5 |
| PSXP | 4 | 7701 | 2 |
| PII | 17 | 103538 | 2 |
| Average | 12.5 | 89770 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $272 million in GIL’s case. CyrusOne Inc (NASDAQ:CONE) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 4 bullish hedge fund positions. Gildan Activewear Inc (NYSE:GIL) 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. In this regard CONE might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
