Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details.). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards NIKE, Inc. (NYSE:NKE).
NIKE, Inc. (NYSE:NKE) investors should pay attention to an increase in activity from the world’s largest hedge funds in recent months. Our calculations also showed that NKE ranks 30th among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned nearly 50% despite the large losses in the market since our recommendation. With all of this in mind we’re going to take a look at the key hedge fund action surrounding NIKE, Inc. (NYSE:NKE).
How are hedge funds trading NIKE, Inc. (NYSE:NKE)?
Heading into the first quarter of 2020, a total of 81 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards NKE over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in NIKE, Inc. (NYSE:NKE), which was worth $381.3 million at the end of the third quarter. On the second spot was Ako Capital which amassed $257.9 million worth of shares. GLG Partners, Point72 Asset Management, and Adage 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 Broad Peak Investment Holdings allocated the biggest weight to NIKE, Inc. (NYSE:NKE), around 11.67% of its 13F portfolio. Banbury Partners is also relatively very bullish on the stock, designating 8.13 percent of its 13F equity portfolio to NKE.
As industrywide interest jumped, key hedge funds have jumped into NIKE, Inc. (NYSE:NKE) headfirst. Ako Capital, managed by Nicolai Tangen, created the biggest position in NIKE, Inc. (NYSE:NKE). Ako Capital had $257.9 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also made a $125 million investment in the stock during the quarter. The other funds with new positions in the stock are Jack Woodruff’s Candlestick Capital Management, Frank Brosens’s Taconic Capital, and Baker Burleson and Stormy Scott’s Banbury Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as NIKE, Inc. (NYSE:NKE) but similarly valued. We will take a look at Abbott Laboratories (NYSE:ABT), Medtronic plc (NYSE:MDT), The Unilever Group (NYSE:UN), and Bristol-Myers Squibb Company (NYSE:BMY). This group of stocks’ market values are closest to NKE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ABT | 62 | 2055531 | -3 |
| MDT | 66 | 2500872 | 10 |
| UN | 15 | 1009132 | -2 |
| BMY | 122 | 7810013 | 61 |
| Average | 66.25 | 3343887 | 16.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 66.25 hedge funds with bullish positions and the average amount invested in these stocks was $3344 million. That figure was $2510 million in NKE’s case. Bristol Myers Squibb Company (NYSE:BMY) is the most popular stock in this table. On the other hand Unilever N.V. (NYSE:UN) is the least popular one with only 15 bullish hedge fund positions. NIKE, Inc. (NYSE:NKE) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Unfortunately NKE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on NKE were disappointed as the stock returned -8.3% during the same time period 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
