The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Capri Holdings Limited (NYSE:CPRI) from the perspective of those elite funds.
Capri Holdings Limited (NYSE:CPRI) shareholders have witnessed an increase in support from the world’s most elite money managers lately. CPRI was in 37 hedge funds’ portfolios at the end of March. There were 33 hedge funds in our database with CPRI holdings at the end of the previous quarter. Our calculations also showed that cpri isn’t among the 30 most popular stocks among hedge funds.
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 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.
Let’s take a look at the recent hedge fund action surrounding Capri Holdings Limited (NYSE:CPRI).
What have hedge funds been doing with Capri Holdings Limited (NYSE:CPRI)?
Heading into the second quarter of 2019, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CPRI over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Capri Holdings Limited (NYSE:CPRI) was held by AQR Capital Management, which reported holding $405.3 million worth of stock at the end of March. It was followed by Eminence Capital with a $390.4 million position. Other investors bullish on the company included Eminence Capital, Rima Senvest Management, and Point72 Asset Management.
Consequently, some big names have been driving this bullishness. Eminence Capital, managed by Ricky Sandler, created the largest position in Capri Holdings Limited (NYSE:CPRI). Eminence Capital had $390.4 million invested in the company at the end of the quarter. Ricky Sandler’s Eminence Capital also initiated a $201.3 million position during the quarter. The other funds with brand new CPRI positions are Israel Englander’s Millennium Management, Aaron Cowen’s Suvretta Capital Management, and Pasco Alfaro / Richard Tumure’s Miura Global Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Capri Holdings Limited (NYSE:CPRI) but similarly valued. We will take a look at Douglas Emmett, Inc. (NYSE:DEI), Nordstrom, Inc. (NYSE:JWN), Nutanix, Inc. (NASDAQ:NTNX), and Foot Locker, Inc. (NYSE:FL). This group of stocks’ market caps are similar to CPRI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DEI | 14 | 363321 | 2 |
| JWN | 26 | 283069 | 3 |
| NTNX | 36 | 456099 | -1 |
| FL | 35 | 956263 | 0 |
| Average | 27.75 | 514688 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $515 million. That figure was $1222 million in CPRI’s case. Nutanix, Inc. (NASDAQ:NTNX) is the most popular stock in this table. On the other hand Douglas Emmett, Inc. (NYSE:DEI) is the least popular one with only 14 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CPRI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CPRI were disappointed as the stock returned -26.1% during the same 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 in Q2.
Disclosure: None. This article was originally published at Insider Monkey.