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 Guess’, Inc. (NYSE:GES).
Is Guess’, Inc. (NYSE:GES) undervalued? Prominent investors are getting more optimistic. The number of long hedge fund positions increased by 2 recently. Our calculations also showed that GES isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). GES was in 17 hedge funds’ portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with GES positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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.
David E. Shaw of D.E. Shaw
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 analyze the fresh hedge fund action surrounding Guess’, Inc. (NYSE:GES).
What does smart money think about Guess’, Inc. (NYSE:GES)?
Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the second quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in GES a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alexander Mitchell’s Scopus Asset Management has the most valuable position in Guess’, Inc. (NYSE:GES), worth close to $23.2 million, accounting for 0.8% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, managed by David E. Shaw, which holds a $17.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions encompass Ken Griffin’s Citadel Investment Group, Richard Mashaal’s Rima Senvest Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Scopus Asset Management allocated the biggest weight to Guess’, Inc. (NYSE:GES), around 0.75% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, earmarking 0.7 percent of its 13F equity portfolio to GES.
As industrywide interest jumped, specific money managers have been driving this bullishness. Rima Senvest Management, managed by Richard Mashaal, assembled the most valuable position in Guess’, Inc. (NYSE:GES). Rima Senvest Management had $8.2 million invested in the company at the end of the quarter. Ira Unschuld’s Brant Point Investment Management also made a $2.9 million investment in the stock during the quarter. The following funds were also among the new GES investors: Sander Gerber’s Hudson Bay Capital Management, Curtis Schenker and Craig Effron’s Scoggin, and Mike Vranos’s Ellington.
Let’s go over hedge fund activity in other stocks similar to Guess’, Inc. (NYSE:GES). These stocks are Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC), OceanFirst Financial Corp. (NASDAQ:OCFC), GreenSky, Inc. (NASDAQ:GSKY), and Winnebago Industries, Inc. (NYSE:WGO). This group of stocks’ market values match GES’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TRHC | 10 | 58647 | 3 |
| OCFC | 13 | 66418 | 0 |
| GSKY | 15 | 55125 | -5 |
| WGO | 15 | 126735 | 2 |
| Average | 13.25 | 76731 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $84 million in GES’s case. GreenSky, Inc. (NASDAQ:GSKY) is the most popular stock in this table. On the other hand Tabula Rasa HealthCare, Inc. (NASDAQ:TRHC) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Guess’, Inc. (NYSE:GES) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately GES wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on GES were disappointed as the stock returned 3.9% during the first two months of the fourth quarter 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 in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
