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. Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards YETI Holdings, Inc. (NYSE:YETI).
Is YETI Holdings, Inc. (NYSE:YETI) a buy, sell, or hold? The best stock pickers are becoming hopeful. The number of bullish hedge fund positions improved by 6 recently. Our calculations also showed that YETI 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).
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 was able to identify in advance a select group of hedge fund holdings that 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.
Howard Marks of Oaktree Capital Management
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 take a look at the new hedge fund action surrounding YETI Holdings, Inc. (NYSE:YETI).
How are hedge funds trading YETI Holdings, Inc. (NYSE:YETI)?
At Q4’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 55% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in YETI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in YETI Holdings, Inc. (NYSE:YETI) was held by Balyasny Asset Management, which reported holding $38.3 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $15.3 million position. Other investors bullish on the company included Citadel Investment Group, Oaktree Capital Management, and Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to YETI Holdings, Inc. (NYSE:YETI), around 1.77% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, setting aside 1.47 percent of its 13F equity portfolio to YETI.
As one would reasonably expect, some big names have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the biggest position in YETI Holdings, Inc. (NYSE:YETI). Balyasny Asset Management had $38.3 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also initiated a $14.1 million position during the quarter. The following funds were also among the new YETI investors: Joseph Samuels’s Islet Management, Ken Grossman and Glen Schneider’s SG Capital Management, and John Osterweis’s Osterweis Capital Management.
Let’s now review hedge fund activity in other stocks similar to YETI Holdings, Inc. (NYSE:YETI). These stocks are Teradata Corporation (NYSE:TDC), Colliers International Group Inc (NASDAQ:CIGI), EnLink Midstream LLC (NYSE:ENLC), and Agree Realty Corporation (NYSE:ADC). This group of stocks’ market caps are closest to YETI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TDC | 28 | 240705 | 5 |
| CIGI | 13 | 756614 | 2 |
| ENLC | 11 | 27563 | -1 |
| ADC | 18 | 228867 | 7 |
| Average | 17.5 | 313437 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $313 million. That figure was $146 million in YETI’s case. Teradata Corporation (NYSE:TDC) is the most popular stock in this table. On the other hand EnLink Midstream LLC (NYSE:ENLC) is the least popular one with only 11 bullish hedge fund positions. YETI Holdings, Inc. (NYSE:YETI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately YETI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); YETI investors were disappointed as the stock returned -38.7% 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 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.
