Hedge Funds Are Selling Foot Locker, Inc. (FL)

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Foot Locker, Inc. (NYSE:FL).

Foot Locker, Inc. (NYSE:FL) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Foot Locker, Inc. (NYSE:FL) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 38. Our calculations also showed that FL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a gander at the latest hedge fund action surrounding Foot Locker, Inc. (NYSE:FL).

Daniel Sundheim of D1 Capital

Do Hedge Funds Think FL Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in FL a year ago. 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, Vesa Equity Investment was the largest shareholder of Foot Locker, Inc. (NYSE:FL), with a stake worth $582.2 million reported as of the end of September. Trailing Vesa Equity Investment was Arrowstreet Capital, which amassed a stake valued at $102.6 million. Citadel Investment Group, Millennium Management, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Vesa Equity Investment allocated the biggest weight to Foot Locker, Inc. (NYSE:FL), around 100% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, setting aside 1.5 percent of its 13F equity portfolio to FL.

Since Foot Locker, Inc. (NYSE:FL) has experienced falling interest from the smart money, we can see that there lies a certain “tier” of fund managers that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Steven Boyd’s Armistice Capital cut the largest position of the 750 funds tracked by Insider Monkey, worth an estimated $31.1 million in stock, and Malcolm Levine’s Dendur Capital was right behind this move, as the fund said goodbye to about $20.6 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Foot Locker, Inc. (NYSE:FL) but similarly valued. These stocks are Lazard Ltd (NYSE:LAZ), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), Cloudera, Inc. (NYSE:CLDR), Fastly, Inc. (NYSE:FSLY), Travel + Leisure Co. (NYSE:TNL), Atotech Limited (NYSE:ATC), and United Bankshares, Inc. (NASDAQ:UBSI). This group of stocks’ market values match FL’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $657 million. That figure was $1051 million in FL’s case. Travel + Leisure Co. (NYSE:TNL) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 14 bullish hedge fund positions. Foot Locker, Inc. (NYSE:FL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FL is 69.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately FL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FL were disappointed as the stock returned 0.6% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.