We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Steven Madden, Ltd. (NASDAQ:SHOO).
Steven Madden, Ltd. (NASDAQ:SHOO) has seen an increase in support from the world’s most elite money managers recently. Our calculations also showed that SHOO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Today there are dozens of indicators market participants have at their disposal to appraise publicly traded companies. A pair of the best indicators are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best fund managers can outpace the S&P 500 by a healthy amount (see the details here).
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s analyze the new hedge fund action encompassing Steven Madden, Ltd. (NASDAQ:SHOO).
Hedge fund activity in Steven Madden, Ltd. (NASDAQ:SHOO)
At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SHOO over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Arrowstreet Capital was the largest shareholder of Steven Madden, Ltd. (NASDAQ:SHOO), with a stake worth $37.1 million reported as of the end of September. Trailing Arrowstreet Capital was GLG Partners, which amassed a stake valued at $8.1 million. AQR Capital Management, Winton Capital Management, and Royce & Associates 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 Zebra Capital Management allocated the biggest weight to Steven Madden, Ltd. (NASDAQ:SHOO), around 1.16% of its 13F portfolio. TwinBeech Capital is also relatively very bullish on the stock, earmarking 0.18 percent of its 13F equity portfolio to SHOO.
As aggregate interest increased, key hedge funds have been driving this bullishness. Winton Capital Management, managed by David Harding, assembled the most valuable position in Steven Madden, Ltd. (NASDAQ:SHOO). Winton Capital Management had $7.1 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $1.9 million position during the quarter. The other funds with brand new SHOO positions are Michael Gelband’s ExodusPoint Capital, Paul Tudor Jones’s Tudor Investment Corp, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Steven Madden, Ltd. (NASDAQ:SHOO) but similarly valued. We will take a look at NorthWestern Corporation (NYSE:NWE), Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), The Descartes Systems Group Inc (NASDAQ:DSGX), and Embraer SA (NYSE:ERJ). All of these stocks’ market caps are closest to SHOO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NWE | 19 | 167358 | 2 |
| AJRD | 21 | 436849 | 0 |
| DSGX | 12 | 97098 | -2 |
| ERJ | 14 | 170112 | -1 |
| Average | 16.5 | 217854 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $218 million. That figure was $85 million in SHOO’s case. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is the most popular stock in this table. On the other hand The Descartes Systems Group Inc (NASDAQ:DSGX) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Steven Madden, Ltd. (NASDAQ:SHOO) is more popular among hedge funds. 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 lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately SHOO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SHOO were disappointed as the stock returned -46.3% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
