Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees in 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the third quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Crocs, Inc. (NASDAQ:CROX).
Is Crocs, Inc. (NASDAQ:CROX) a buy right now? The best stock pickers are buying. The number of long hedge fund positions inched up by 6 lately. Our calculations also showed that CROX 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Gabriel Plotkin of Melvin Capital 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. We’re going to analyze the key hedge fund action encompassing Crocs, Inc. (NASDAQ:CROX).
What does smart money think about Crocs, Inc. (NASDAQ:CROX)?
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from the second quarter of 2019. By comparison, 27 hedge funds held shares or bullish call options in CROX a year ago. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the biggest position in Crocs, Inc. (NASDAQ:CROX), worth close to $104.1 million, amounting to 0.1% of its total 13F portfolio. Coming in second is Gabriel Plotkin of Melvin Capital Management, with a $58.3 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other peers that are bullish consist of James Woodson Davis’s Woodson Capital Management, Paul Marshall and Ian Wace’s Marshall Wace and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Crocs, Inc. (NASDAQ:CROX), around 8.63% of its portfolio. Portolan Capital Management is also relatively very bullish on the stock, setting aside 2.68 percent of its 13F equity portfolio to CROX.
With a general bullishness amongst the heavyweights, some big names have jumped into Crocs, Inc. (NASDAQ:CROX) headfirst. Melvin Capital Management, managed by Gabriel Plotkin, assembled the biggest position in Crocs, Inc. (NASDAQ:CROX). Melvin Capital Management had $58.3 million invested in the company at the end of the quarter. George McCabe’s Portolan Capital Management also initiated a $23.8 million position during the quarter. The other funds with new positions in the stock are Lee Ainslie’s Maverick Capital, Richard Driehaus’s Driehaus Capital, and Donald Sussman’s Paloma Partners.
Let’s check out hedge fund activity in other stocks similar to Crocs, Inc. (NASDAQ:CROX). These stocks are Qudian Inc. (NYSE:QD), Xencor Inc (NASDAQ:XNCR), Compass Minerals International, Inc. (NYSE:CMP), and Horace Mann Educators Corporation (NYSE:HMN). This group of stocks’ market caps match CROX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QD | 12 | 80964 | -10 |
| XNCR | 12 | 139670 | 0 |
| CMP | 13 | 139635 | -3 |
| HMN | 13 | 35454 | 1 |
| Average | 12.5 | 98931 | -3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $99 million. That figure was $418 million in CROX’s case. Compass Minerals International, Inc. (NYSE:CMP) is the most popular stock in this table. On the other hand Qudian Inc. (NYSE:QD) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Crocs, Inc. (NASDAQ:CROX) 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. Hedge funds were also right about betting on CROX as the stock returned 25.7% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
