Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Movado Group, Inc (NYSE:MOV).
Is Movado Group, Inc (NYSE:MOV) the right pick for your portfolio? Prominent investors are getting less bullish. The number of bullish hedge fund positions dropped by 1 recently. Our calculations also showed that MOV isn’t among the 30 most popular stocks among hedge funds. MOV was in 25 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with MOV positions at the end of the previous quarter.
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 the 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 market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the new hedge fund action regarding Movado Group, Inc (NYSE:MOV).
What does the smart money think about Movado Group, Inc (NYSE:MOV)?
At Q3’s end, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the second quarter of 2018. On the other hand, there were a total of 19 hedge funds with a bullish position in MOV at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Richard Driehaus’s Driehaus Capital has the number one position in Movado Group, Inc (NYSE:MOV), worth close to $18.3 million, amounting to 0.6% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, managed by Jim Simons, which holds a $11.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions comprise Israel Englander’s Millennium Management, Chuck Royce’s Royce & Associates and Cliff Asness’s AQR Capital Management.
Seeing as Movado Group, Inc (NYSE:MOV) has experienced falling interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors dropped the largest position of all the hedgies tracked by Insider Monkey, totaling close to $1.4 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund said goodbye to about $0.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Movado Group, Inc (NYSE:MOV) but similarly valued. We will take a look at MBIA Inc. (NYSE:MBI), Aptinyx Inc. (NASDAQ:APTX), Hi-Crush Partners LP (NYSE:HCLP), and Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH). This group of stocks’ market caps are closest to MOV’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MBI | 19 | 286935 | 0 |
| APTX | 12 | 198713 | -6 |
| HCLP | 4 | 2804 | -4 |
| RUTH | 15 | 54321 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $84 million in MOV’s case. MBIA Inc. (NYSE:MBI) is the most popular stock in this table. On the other hand Hi-Crush Partners LP (NYSE:HCLP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Movado Group, Inc (NYSE:MOV) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
