Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Capri Holdings Limited (NYSE:CPRI) from the perspective of those elite funds and compare it against similarly valued stocks like First Industrial Realty Trust, Inc. (NYSE:FR), PS Business Parks Inc (NYSE:PSB), OneMain Holdings Inc (NYSE:OMF), and Wyndham Hotels & Resorts, Inc. (NYSE:WH).
Is Capri Holdings Limited (NYSE:CPRI) a buy here? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund bets rose by 2 lately. Our calculations also showed that CPRI 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.
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 has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ricky Sandler of Eminence Capital
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. Let’s review the latest hedge fund action regarding Capri Holdings Limited (NYSE:CPRI).
Hedge fund activity in Capri Holdings Limited (NYSE:CPRI)
At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the second quarter of 2019. On the other hand, there were a total of 47 hedge funds with a bullish position in CPRI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Eminence Capital was the largest shareholder of Capri Holdings Limited (NYSE:CPRI), with a stake worth $450.1 million reported as of the end of September. Trailing Eminence Capital was D E Shaw, which amassed a stake valued at $111.5 million. Rima Senvest Management, Masters Capital Management, and Arrowstreet Capital 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 Atlantic Investment Management allocated the biggest weight to Capri Holdings Limited (NYSE:CPRI), around 11.28% of its portfolio. Rima Senvest Management is also relatively very bullish on the stock, earmarking 7.64 percent of its 13F equity portfolio to CPRI.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Masters Capital Management, managed by Mike Masters, assembled the most valuable call position in Capri Holdings Limited (NYSE:CPRI). Masters Capital Management had $33.2 million invested in the company at the end of the quarter. Alexander Roepers’s Atlantic Investment Management also initiated a $32.1 million position during the quarter. The following funds were also among the new CPRI investors: Mark Coe’s Intrinsic Edge Capital, William C. Martin’s Raging Capital Management, and George McCabe’s Portolan Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Capri Holdings Limited (NYSE:CPRI) but similarly valued. These stocks are First Industrial Realty Trust, Inc. (NYSE:FR), PS Business Parks Inc (NYSE:PSB), OneMain Holdings Inc (NYSE:OMF), and Wyndham Hotels & Resorts, Inc. (NYSE:WH). This group of stocks’ market valuations resemble CPRI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FR | 16 | 240768 | -2 |
| PSB | 17 | 60032 | 3 |
| OMF | 26 | 398536 | -1 |
| WH | 36 | 800953 | -4 |
| Average | 23.75 | 375072 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $375 million. That figure was $920 million in CPRI’s case. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is the most popular stock in this table. On the other hand First Industrial Realty Trust, Inc. (NYSE:FR) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Capri Holdings Limited (NYSE:CPRI) 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 CPRI as the stock returned 12% 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.
