Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost more than 25%. Facebook, which was the second most popular stock, lost 20% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the first 2.5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Is Urban Outfitters, Inc. (NASDAQ:URBN) the right investment to pursue these days? Hedge funds are becoming less confident. The number of long hedge fund bets dropped by 3 recently. Our calculations also showed that urbn isn’t among the 30 most popular stocks among hedge funds. URBN was in 28 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 31 hedge funds in our database with URBN holdings at the end of the previous quarter.
In the financial world there are many methods investors put to use to size up their stock investments. Two of the best methods are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top money managers can outperform the broader indices by a significant margin (see the details here).
We’re going to take a look at the key hedge fund action surrounding Urban Outfitters, Inc. (NASDAQ:URBN).
What does the smart money think about Urban Outfitters, Inc. (NASDAQ:URBN)?
At the end of the fourth quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in URBN over the last 14 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of Urban Outfitters, Inc. (NASDAQ:URBN), with a stake worth $137.8 million reported as of the end of September. Trailing AQR Capital Management was Arrowstreet Capital, which amassed a stake valued at $39.2 million. Bridgewater Associates, Millennium Management, and Columbus Circle Investors were also very fond of the stock, giving the stock large weights in their portfolios.
Since Urban Outfitters, Inc. (NASDAQ:URBN) has faced declining sentiment from hedge fund managers, it’s safe to say that there is a sect of hedgies that slashed their full holdings by the end of the third quarter. It’s worth mentioning that David Keidan’s Buckingham Capital Management sold off the biggest stake of all the hedgies followed by Insider Monkey, totaling an estimated $2.7 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund dropped about $1.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Urban Outfitters, Inc. (NASDAQ:URBN) but similarly valued. We will take a look at IBERIABANK Corporation (NASDAQ:IBKC), Healthcare Realty Trust Inc (NYSE:HR), Ritchie Bros. Auctioneers Incorporated (NYSE:RBA), and Echostar Corporation (NASDAQ:SATS). This group of stocks’ market valuations are similar to URBN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IBKC | 24 | 224156 | 3 |
| HR | 9 | 43650 | 5 |
| RBA | 12 | 90035 | -3 |
| SATS | 34 | 422161 | 6 |
| Average | 19.75 | 195001 | 2.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $195 million. That figure was $371 million in URBN’s case. Echostar Corporation (NASDAQ:SATS) is the most popular stock in this table. On the other hand Healthcare Realty Trust Inc (NYSE:HR) is the least popular one with only 9 bullish hedge fund positions. Urban Outfitters, Inc. (NASDAQ:URBN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately URBN wasn’t nearly as popular as these 15 stock and hedge funds that were betting on URBN were disappointed as the stock returned -12.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
