Hedge Funds Are Dumping Shoe Carnival, Inc. (SCVL)

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.

Is Shoe Carnival, Inc. (NASDAQ:SCVL) ready to rally soon? The smart money is becoming less hopeful. The number of long hedge fund positions shrunk by 9 recently. At the end of this article we will also compare SCVL to other stocks, including UTi Worldwide Inc. (NASDAQ:UTIW), Star Gas Partners, L.P. (NYSE:SGU), and Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY) to get a better sense of its popularity.

In the eyes of most traders, hedge funds are viewed as slow, outdated investment vehicles of yesteryear. While there are greater than an 8000 funds in operation at present, We choose to focus on the bigwigs of this club, around 700 funds. It is estimated that this group of investors handle the lion’s share of all hedge funds’ total asset base, and by keeping an eye on their best equity investments, Insider Monkey has identified a few investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, let’s check out the fresh action regarding Shoe Carnival, Inc. (NASDAQ:SCVL).

Hedge fund activity in Shoe Carnival, Inc. (NASDAQ:SCVL)

At the Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a drop of 43% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Shoe Carnival, Inc. (NASDAQ:SCVL). Royce & Associates has a $68.6 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting at the No. 2 spot is Archon Capital Management, led by Constantinos J. Christofilis, holding a $3.1 million position; 2.8% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism encompass Alexander Mitchell’s Scopus Asset Management, Cliff Asness’ AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Seeing as Shoe Carnival, Inc. (NASDAQ:SCVL) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there is a sect of funds who sold off their entire stakes in the third quarter. Intriguingly, Richard Driehaus’s Driehaus Capital dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, worth about $3.1 million in stock, and Mark Lee’s Forest Hill Capital was right behind this move, as the fund dumped about $2.6 million worth of stock. These moves are important to note, as total hedge fund interest dropped by 9 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Shoe Carnival, Inc. (NASDAQ:SCVL) but similarly valued. These stocks are UTi Worldwide Inc. (NASDAQ:UTIW), Star Gas Partners, L.P. (NYSE:SGU), Cresud S.A.C.I.F. y A. (ADR) (NASDAQ:CRESY), and Hornbeck Offshore Services, Inc. (NYSE:HOS). This group of stocks’ market values are similar to SCVL’s market value.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $85 million in SCVL’s case. Hornbeck Offshore Services, Inc. (NYSE:HOS) is the most popular stock in this table. On the other hand Star Gas Partners, L.P. (NYSE:SGU) is the least popular one with only 5 bullish hedge fund positions. Shoe Carnival, Inc. (NASDAQ:SCVL) 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 HOS might be a better candidate to consider a long position.