Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Macy’s, Inc. (NYSE:M) to find out whether it was one of their high conviction long-term ideas.
Is Macy’s, Inc. (NYSE:M) going to take off soon? Investors who are in the know are turning less bullish. The number of bullish hedge fund bets were trimmed by 3 lately. Our calculations also showed that M 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.
To the average investor there are a multitude of metrics shareholders employ to assess stocks. A couple of the most useful metrics are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the top picks of the elite hedge fund managers can beat their index-focused peers by a solid amount (see the details here).
Donald Yacktman of Yacktman Asset Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the latest hedge fund action encompassing Macy’s, Inc. (NYSE:M).
Hedge fund activity in Macy’s, Inc. (NYSE:M)
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards M over the last 17 quarters. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Macy’s, Inc. (NYSE:M) was held by Yacktman Asset Management, which reported holding $369.3 million worth of stock at the end of September. It was followed by AQR Capital Management with a $75.7 million position. Other investors bullish on the company included Bridgewater Associates, Millennium Management, and Coatue Management. In terms of the portfolio weights assigned to each position Yacktman Asset Management allocated the biggest weight to Macy’s, Inc. (NYSE:M), around 4.54% of its portfolio. Stamos Capital is also relatively very bullish on the stock, designating 4.01 percent of its 13F equity portfolio to M.
Judging by the fact that Macy’s, Inc. (NYSE:M) has experienced a decline in interest from hedge fund managers, it’s easy to see that there is a sect of funds that slashed their positions entirely by the end of the third quarter. Interestingly, Steven Tananbaum’s GoldenTree Asset Management dumped the biggest stake of all the hedgies monitored by Insider Monkey, valued at close to $17.4 million in stock. Lee Ainslie’s fund, Maverick Capital, also dumped its stock, about $16.2 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Macy’s, Inc. (NYSE:M) but similarly valued. We will take a look at Western Alliance Bancorporation (NYSE:WAL), Shell Midstream Partners LP (NYSE:SHLX), PLDT Inc. (NYSE:PHI), and Grand Canyon Education Inc (NASDAQ:LOPE). This group of stocks’ market caps match M’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WAL | 25 | 254686 | -2 |
| SHLX | 6 | 12026 | 1 |
| PHI | 5 | 71651 | 0 |
| LOPE | 23 | 107964 | 0 |
| Average | 14.75 | 111582 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.75 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $652 million in M’s case. Western Alliance Bancorporation (NYSE:WAL) is the most popular stock in this table. On the other hand PLDT Inc. (NYSE:PHI) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Macy’s, Inc. (NYSE:M) 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 M wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on M were disappointed as the stock returned -1.4% 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.
