We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Farfetch Limited (NYSE:FTCH), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Farfetch Limited (NYSE:FTCH) was in 27 hedge funds’ portfolios at the end of December. FTCH investors should be aware of an increase in hedge fund interest of late. There were 22 hedge funds in our database with FTCH positions at the end of the previous quarter. Our calculations also showed that FTCH isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 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 more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Eashwar Krishnan of Tybourne Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a peek at the new hedge fund action regarding Farfetch Limited (NYSE:FTCH).
How are hedge funds trading Farfetch Limited (NYSE:FTCH)?
At the end of the fourth quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards FTCH over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Farfetch Limited (NYSE:FTCH) was held by Tybourne Capital Management, which reported holding $187 million worth of stock at the end of September. It was followed by Tremblant Capital with a $119.5 million position. Other investors bullish on the company included Miller Value Partners, Altimeter Capital Management, and Luxor Capital Group. In terms of the portfolio weights assigned to each position Marcho Partners allocated the biggest weight to Farfetch Limited (NYSE:FTCH), around 7.96% of its 13F portfolio. Tybourne Capital Management is also relatively very bullish on the stock, setting aside 7.17 percent of its 13F equity portfolio to FTCH.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Tremblant Capital, managed by Brett Barakett, established the biggest position in Farfetch Limited (NYSE:FTCH). Tremblant Capital had $119.5 million invested in the company at the end of the quarter. Bill Miller’s Miller Value Partners also made a $55.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Carl Anderson’s Marcho Partners, Michel Massoud’s Melqart Asset Management, and Anand Parekh’s Alyeska Investment Group.
Let’s now take a look at hedge fund activity in other stocks similar to Farfetch Limited (NYSE:FTCH). These stocks are Stantec Inc. (NYSE:STN), Barnes Group Inc. (NYSE:B), Cedar Fair, L.P. (NYSE:FUN), and Spectrum Brands Holdings, Inc. (NYSE:SPB). This group of stocks’ market values resemble FTCH’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| STN | 9 | 91998 | 2 |
| B | 11 | 26705 | -5 |
| FUN | 9 | 80652 | -4 |
| SPB | 45 | 556205 | 9 |
| Average | 18.5 | 188890 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $493 million in FTCH’s case. Spectrum Brands Holdings, Inc. (NYSE:SPB) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 9 bullish hedge fund positions. Farfetch Limited (NYSE:FTCH) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately FTCH wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on FTCH were disappointed as the stock returned -23.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
