At Insider Monkey we follow nearly 750 of the best-performing investors and even though many of them lost money in the last couple of months of 2018 (some actually delivered very strong returns), the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.
YETI Holdings, Inc. (NYSE:YETI) shareholders have witnessed an increase in activity from the world’s largest hedge funds lately. Our calculations also showed that YETI isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s take a glance at the new hedge fund action surrounding YETI Holdings, Inc. (NYSE:YETI).
What does smart money think about YETI Holdings, Inc. (NYSE:YETI)?
Heading into the second quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 40% from the fourth quarter of 2018. On the other hand, there were a total of 0 hedge funds with a bullish position in YETI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Oaktree Capital Management was the largest shareholder of YETI Holdings, Inc. (NYSE:YETI), with a stake worth $19.2 million reported as of the end of March. Trailing Oaktree Capital Management was Citadel Investment Group, which amassed a stake valued at $9.8 million. Arrowstreet Capital, Citadel Investment Group, and Driehaus Capital were also very fond of the stock, giving the stock large weights in their portfolios.
With a general bullishness amongst the heavyweights, some big names were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, created the largest position in YETI Holdings, Inc. (NYSE:YETI). Arrowstreet Capital had $6.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $3.1 million investment in the stock during the quarter. The following funds were also among the new YETI investors: Richard Driehaus’s Driehaus Capital, Daniel S. Och’s OZ Management, and Dmitry Balyasny’s Balyasny Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to YETI Holdings, Inc. (NYSE:YETI). These stocks are Reata Pharmaceuticals, Inc. (NASDAQ:RETA), Dana Incorporated (NYSE:DAN), SailPoint Technologies Holdings, Inc. (NYSE:SAIL), and Companhia Paranaense de Energia – COPEL (NYSE:ELP). This group of stocks’ market values resemble YETI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RETA | 18 | 255693 | 1 |
| DAN | 27 | 342929 | -1 |
| SAIL | 27 | 258676 | 5 |
| ELP | 10 | 52781 | 2 |
| Average | 20.5 | 227520 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $228 million. That figure was $50 million in YETI’s case. Dana Incorporated (NYSE:DAN) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia – COPEL (NYSE:ELP) is the least popular one with only 10 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 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 -6.5% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.