Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about V.F. Corporation (NYSE:VFC) in this article.
V.F. Corporation (NYSE:VFC) was in 29 hedge funds’ portfolios at the end of December. VFC has experienced a decrease in hedge fund interest in recent months. There were 36 hedge funds in our database with VFC holdings at the end of the previous quarter. Our calculations also showed that VFC isn’t 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.
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’ 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 S&P 500 ETFs by 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 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.
Ken Griffin of Citadel Investment Group
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 more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s take a peek at the key hedge fund action encompassing V.F. Corporation (NYSE:VFC).
What have hedge funds been doing with V.F. Corporation (NYSE:VFC)?
Heading into the first quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards VFC over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in V.F. Corporation (NYSE:VFC). Citadel Investment Group has a $183 million position in the stock, comprising 0.1% of its 13F portfolio. On Citadel Investment Group’s heels is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $142.3 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include Robert Pohly’s Samlyn Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Shellback Capital allocated the biggest weight to V.F. Corporation (NYSE:VFC), around 2.62% of its 13F portfolio. Ayrshire Capital Management is also relatively very bullish on the stock, earmarking 2.4 percent of its 13F equity portfolio to VFC.
Due to the fact that V.F. Corporation (NYSE:VFC) has witnessed falling interest from the smart money, logic holds that there were a few funds that elected to cut their entire stakes in the third quarter. At the top of the heap, Robert Pohly’s Samlyn Capital sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, worth about $46.8 million in stock. Renaissance Technologies, also sold off its stock, about $45 million worth. These transactions are important to note, as total hedge fund interest fell by 7 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as V.F. Corporation (NYSE:VFC) but similarly valued. We will take a look at Dollar General Corp. (NYSE:DG), Manulife Financial Corporation (NYSE:MFC), FedEx Corporation (NYSE:FDX), and The Kraft Heinz Company (NASDAQ:KHC). This group of stocks’ market values resemble VFC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DG | 50 | 2075641 | 1 |
| MFC | 19 | 284486 | 0 |
| FDX | 45 | 1481070 | 0 |
| KHC | 34 | 10747172 | -5 |
| Average | 37 | 3647092 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $3647 million. That figure was $771 million in VFC’s case. Dollar General Corp. (NYSE:DG) is the most popular stock in this table. On the other hand Manulife Financial Corporation (NYSE:MFC) is the least popular one with only 19 bullish hedge fund positions. V.F. Corporation (NYSE:VFC) 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 11.7% in 2020 through March 11th but beat the market by 3.1 percentage points. Unfortunately VFC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VFC investors were disappointed as the stock returned -36.6% 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.
Disclosure: None. This article was originally published at Insider Monkey.
