The market has been volatile as the Federal Reserve winds down its easy money policies. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25th and the end of October. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Cherokee Inc. (NASDAQ:CHKE) and find out how it is affected by the hedge funds’ moves.
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Cherokee Inc. (NASDAQ:CHKE) investors should be aware of a decrease in activity from the world’s largest hedge funds recently. Cherokee Inc. (NASDAQ:CHKE) was in 8 hedge funds’ portfolio at the end of September. There were 10 hedge funds in our database with Cherokee Inc. (NASDAQ:CHKE) holdings at the end of the previous quarter. At the end of this article, we will also compare Cherokee Inc. (NASDAQ:CHKE) to other stocks, including Global Partner Acquisition Corp. (NASDAQ:GPAC), hhgregg, Inc. (NYSE:HGG), and Sharps Compliance Corp. (NASDAQ:SMED) to get a better sense of its popularity.
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In the eyes of most investors, hedge funds are seen as underperforming, outdated financial vehicles of yesteryear. While there are more than 8000 funds in operation at present, Experts at Insider Monkey, a website specializing in hedge funds, choose to focus on the crème de la crème of this group, around 700 funds. These hedge fund managers control most of the hedge fund industry’s total asset base, and by monitoring their finest investments, Insider Monkey has identified a number of investment strategies that have historically outrun the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, we’re going to review the recent action encompassing Cherokee Inc. (NASDAQ:CHKE).
How are hedge funds trading Cherokee Inc. (NASDAQ:CHKE)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish in this stock, a drop of 20% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who amassed substantial positions during the third quarter.
Of the funds tracked by Insider Monkey, Jeffrey Bronchick’s Cove Street Capital had the most valuable position in Cherokee Inc. (NASDAQ:CHKE), worth close to $12.4 million, corresponding to 1.6% of its total 13F portfolio. The second most bullish hedge fund manager is David Park of Headlands Capital, with a $10.6 million position; the fund has 11.2% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions comprise Jim Simons’s Renaissance Technologies, Richard Driehaus’s Driehaus Capital and Phil Frohlich’s Prescott Group Capital Management.
Seeing as Cherokee Inc. (NASDAQ:CHKE) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there is a sect of hedge funds that elected to cut their positions entirely at the end of the third quarter. It’s worth mentioning that Mike Vranos’s Ellington sold off the largest position of the 700 funds followed by Insider Monkey, comprising an estimated $0.3 million in stock, and Neil Chriss of Hutchin Hill Capital was right behind this move, as the fund sold off about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 2 funds at the end of the third quarter.
Let’s also take a look at hedge fund activity in other stocks similar to Cherokee Inc. (NASDAQ:CHKE). We will take a look at Global Partner Acquisition Corp. (NASDAQ:GPAC), hhgregg, Inc. (NYSE:HGG), Sharps Compliance Corp. (NASDAQ:SMED), and Adaptimmune Therapeutics PLC – ADR (NASDAQ:ADAP). This group of stocks’ market caps match Cherokee Inc. (NASDAQ:CHKE)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GPAC | 9 | 51900 | 9 |
| HGG | 8 | 11739 | 0 |
| SMED | 5 | 3923 | 1 |
| ADAP | 12 | 45571 | -4 |
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. Adaptimmune Therapeutics PLC – ADR (NASDAQ:ADAP) is the most popular stock in this table. On the other hand Sharps Compliance Corp. (NASDAQ:SMED) is the least popular one with only 5 bullish hedge fund positions. Cherokee Inc. (NASDAQ:CHKE) is not the least popular stock, but GPAC saw nine more funds initiating stakes, as compared to CHKE, which registered a decline in sentiment. With this in mind, CHKE might not be the best investment and one has to go into more detail before considering his next move involving the stock.
