At Insider Monkey, we pore over the filings of more than 700 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Steven Madden, Ltd. (NASDAQ:SHOO) makes for a good investment right now.
Steven Madden, Ltd. (NASDAQ:SHOO) was in 15 hedge funds’ portfolios at the end of September. SHOO has seen an increase in support from the world’s most elite money managers recently. There were 13 hedge funds in our database with SHOO holdings at the end of the previous quarter. Our calculations also showed that shoo 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.
We’re going to take a look at the recent hedge fund action encompassing Steven Madden, Ltd. (NASDAQ:SHOO).
How have hedgies been trading Steven Madden, Ltd. (NASDAQ:SHOO)?
Heading into the fourth quarter of 2018, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the second quarter of 2018. By comparison, 13 hedge funds held shares or bullish call options in SHOO heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Marshall Wace LLP was the largest shareholder of Steven Madden, Ltd. (NASDAQ:SHOO), with a stake worth $19.9 million reported as of the end of September. Trailing Marshall Wace LLP was Two Sigma Advisors, which amassed a stake valued at $14.5 million. Royce & Associates, D E Shaw, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names have jumped into Steven Madden, Ltd. (NASDAQ:SHOO) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in Steven Madden, Ltd. (NASDAQ:SHOO). Marshall Wace LLP had $19.9 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $2.4 million investment in the stock during the quarter. The other funds with brand new SHOO positions are Brandon Haley’s Holocene Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Matthew Tewksbury’s Stevens Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Steven Madden, Ltd. (NASDAQ:SHOO) but similarly valued. These stocks are LogMeIn Inc (NASDAQ:LOGM), Coupa Software Incorporated (NYSE:COUP), Assured Guaranty Ltd. (NYSE:AGO), and Carter’s, Inc. (NYSE:CRI). This group of stocks’ market caps match SHOO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LOGM | 29 | 537051 | -1 |
| COUP | 39 | 1228848 | 12 |
| AGO | 33 | 615215 | 1 |
| CRI | 26 | 484116 | -1 |
| Average | 31.75 | 716308 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $716 million. That figure was $80 million in SHOO’s case. Coupa Software Incorporated (NYSE:COUP) is the most popular stock in this table. On the other hand Carter’s, Inc. (NYSE:CRI) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks Steven Madden, Ltd. (NASDAQ:SHOO) is even less popular than CRI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
