It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren’t usually symmetrically distributed and index returns are affected more by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index’s returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index under-perform the benchmark. Hence, if you randomly pick a stock, there is a more than 50% chance that you’d fail to beat the market. At the same time, the 30 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated a return of 15.1% over the last 12 months (vs. 5.6% gain for SPY), with 53% of these stocks outperforming the benchmark. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Michael Kors Holdings Ltd (NYSE:KORS).
Is Michael Kors Holdings Ltd (NYSE:KORS) a worthy stock to buy now? Hedge funds are turning bullish. The number of bullish hedge fund bets increased by 12 in recent months. Our calculations also showed that KORS isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to the beat the market between 1999 and 2016. However, we were 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’ll significantly under-perform when compared to the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s review the key hedge fund action regarding Michael Kors Holdings Ltd (NYSE:KORS).
What have hedge funds been doing with Michael Kors Holdings Ltd (NYSE:KORS)?
Heading into the fourth quarter of 2018, a total of 47 of the hedge funds tracked by Insider Monkey went long on this stock, a change of 34% from the second quarter of 2018. By comparison, 37 hedge funds held shares or bullish call options in KORS heading into this year. With hedgies’ sentiment swirling, there exist a few key hedge fund managers who were increasing their holdings considerably (or have already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Michael Kors Holdings Ltd (NYSE:KORS), with a stake worth $467.2 million reported as of the end of September. Trailing AQR Capital Management was D E Shaw, which amassed a stake valued at $165.1 million. Citadel Investment Group, Millennium Management, and Arrowstreet Capital were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers have been driving this bullishness. Renaissance Technologies, managed by Jim Simons, assembled the most valuable position in Michael Kors Holdings Ltd (NYSE:KORS). Renaissance Technologies had $13.1 million invested in the company at the end of the quarter. Pasco Alfaro / Richard Tumure’s Miura Global Management also initiated a $12 million position during the quarter. The other funds with new positions in the stock are Jeffrey Talpins’s Element Capital Management, Sander Gerber’s Hudson Bay Capital Management, and Ian Simm’s Impax Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Michael Kors Holdings Ltd (NYSE:KORS) but similarly valued. We will take a look at Qurate Retail, Inc. (NASDAQ:QRTEA), Open Text Corporation (NASDAQ:OTEX), BeiGene, Ltd. (NASDAQ:BGNE), and Jazz Pharmaceuticals plc (NASDAQ:JAZZ). This group of stocks’ market caps are closest to KORS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QRTEA | 36 | 1096657 | 0 |
| OTEX | 19 | 759011 | 6 |
| BGNE | 23 | 3215879 | 2 |
| JAZZ | 29 | 1005592 | 2 |
| Average | 26.75 | 1519 | 2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $1,519 million. That figure was $1,556 million in KORS’s case. Qurate Retail, Inc. (NASDAQ:QRTEA) is the most popular stock in this table. On the other hand, Open Text Corporation (NASDAQ:OTEX) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks, Michael Kors Holdings Ltd (NYSE:KORS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
