We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Canada Goose Holdings Inc. (NYSE:GOOS).
Is Canada Goose Holdings Inc. (NYSE:GOOS) the right investment to pursue these days? Hedge funds are in a pessimistic mood. The number of bullish hedge fund positions retreated by 4 in recent months. Our calculations also showed that GOOS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 stocks that are in our short portfolio.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a glance at the fresh hedge fund action regarding Canada Goose Holdings Inc. (NYSE:GOOS).
Hedge fund activity in Canada Goose Holdings Inc. (NYSE:GOOS)
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GOOS over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the most valuable position in Canada Goose Holdings Inc. (NYSE:GOOS), worth close to $185.1 million, amounting to 1.3% of its total 13F portfolio. The second largest stake is held by EMS Capital, managed by Edmond M. Safra, which holds a $58.8 million position; the fund has 4.7% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions encompass Ted Kang’s Kylin Management, Ken Griffin’s Citadel Investment Group and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital. In terms of the portfolio weights assigned to each position Kylin Management allocated the biggest weight to Canada Goose Holdings Inc. (NYSE:GOOS), around 8.26% of its 13F portfolio. EMS Capital is also relatively very bullish on the stock, setting aside 4.69 percent of its 13F equity portfolio to GOOS.
Due to the fact that Canada Goose Holdings Inc. (NYSE:GOOS) has witnessed bearish sentiment from the smart money, it’s safe to say that there were a few funds that decided to sell off their full holdings by the end of the third quarter. It’s worth mentioning that Dmitry Balyasny’s Balyasny Asset Management cut the biggest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $13.9 million in stock. Steven Boyd’s fund, Armistice Capital, also said goodbye to its stock, about $8.4 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Canada Goose Holdings Inc. (NYSE:GOOS). We will take a look at National General Holdings Corp (NASDAQ:NGHC), World Fuel Services Corporation (NYSE:INT), ITT Educational Services, Inc. (NYSE:ESI), and Wright Medical Group N.V. (NASDAQ:WMGI). This group of stocks’ market caps resemble GOOS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NGHC | 17 | 224476 | -1 |
| INT | 18 | 200195 | -1 |
| ESI | 26 | 604940 | -1 |
| WMGI | 35 | 705939 | 1 |
| Average | 24 | 433888 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $434 million. That figure was $306 million in GOOS’s case. Wright Medical Group N.V. (NASDAQ:WMGI) is the most popular stock in this table. On the other hand National General Holdings Corp (NASDAQ:NGHC) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Canada Goose Holdings Inc. (NYSE:GOOS) is even less popular than NGHC. Hedge funds dodged a bullet by taking a bearish stance towards GOOS. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GOOS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); GOOS investors were disappointed as the stock returned -13.2% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
