How do we determine whether Apex Global Brands Inc. (NASDAQ:APEX) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.
Apex Global Brands Inc. (NASDAQ:APEX) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds’ portfolios at the end of September. At the end of this article we will also compare APEX to other stocks including Five Star Senior Living Inc. (NASDAQ:FVE), Intec Pharma Ltd (NASDAQ:NTEC), and Nuvectra Corporation (NASDAQ:NVTR) to get a better sense of its popularity.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Jeffrey Bronchick of Cove Street Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a glance at the key hedge fund action surrounding Apex Global Brands Inc. (NASDAQ:APEX).
Hedge fund activity in Apex Global Brands Inc. (NASDAQ:APEX)
At Q3’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 3 hedge funds with a bullish position in APEX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
The largest stake in Apex Global Brands Inc. (NASDAQ:APEX) was held by Cove Street Capital, which reported holding $1.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $0.2 million position. The only other hedge fund that is bullish on the company was Citadel Investment Group.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s also examine hedge fund activity in other stocks similar to Apex Global Brands Inc. (NASDAQ:APEX). We will take a look at Five Star Senior Living Inc. (NASDAQ:FVE), Intec Pharma Ltd (NASDAQ:NTEC), Nuvectra Corporation (NASDAQ:NVTR), and Microbot Medical Inc. (NASDAQ:MBOT). This group of stocks’ market valuations match APEX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FVE | 4 | 1233 | 0 |
| NTEC | 5 | 1156 | -6 |
| NVTR | 11 | 1566 | 0 |
| MBOT | 2 | 1510 | -1 |
| Average | 5.5 | 1366 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $1 million. That figure was $2 million in APEX’s case. Nuvectra Corporation (NASDAQ:NVTR) is the most popular stock in this table. On the other hand Microbot Medical Inc. (NASDAQ:MBOT) is the least popular one with only 2 bullish hedge fund positions. Apex Global Brands Inc. (NASDAQ:APEX) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately APEX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); APEX investors were disappointed as the stock returned -26.5% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.