Is Caleres Inc (NYSE:CAL) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Caleres Inc (NYSE:CAL) an attractive stock to buy now? The smart money is buying. The number of bullish hedge fund positions moved up by 7 lately. Our calculations also showed that CAL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). CAL was in 15 hedge funds’ portfolios at the end of the third quarter of 2019. There were 8 hedge funds in our database with CAL holdings at the end of the previous quarter.
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.
Lee Ainslie of Maverick Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the key hedge fund action regarding Caleres Inc (NYSE:CAL).
How are hedge funds trading Caleres Inc (NYSE:CAL)?
Heading into the fourth quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 88% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in CAL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Caleres Inc (NYSE:CAL) was held by Royce & Associates, which reported holding $33.8 million worth of stock at the end of September. It was followed by Millennium Management with a $13.7 million position. Other investors bullish on the company included Citadel Investment Group, Maverick Capital, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Royce & Associates allocated the biggest weight to Caleres Inc (NYSE:CAL), around 0.31% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, dishing out 0.23 percent of its 13F equity portfolio to CAL.
Now, specific money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Caleres Inc (NYSE:CAL). Arrowstreet Capital had $4.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.9 million position during the quarter. The following funds were also among the new CAL investors: Michael Gelband’s ExodusPoint Capital, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, and David Harding’s Winton Capital Management.
Let’s go over hedge fund activity in other stocks similar to Caleres Inc (NYSE:CAL). We will take a look at Valaris plc (NYSE:VAL), OneSpaWorld Holdings Limited (NASDAQ:OSW), Unitil Corporation (NYSE:UTL), and Kelly Services, Inc. (NASDAQ:KELYA). This group of stocks’ market valuations match CAL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VAL | 18 | 172771 | -10 |
| OSW | 8 | 68378 | -3 |
| UTL | 12 | 85939 | 3 |
| KELYA | 13 | 21215 | 3 |
| Average | 12.75 | 87076 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $87 million. That figure was $76 million in CAL’s case. Valaris plc (NYSE:VAL) is the most popular stock in this table. On the other hand OneSpaWorld Holdings Limited (NASDAQ:OSW) is the least popular one with only 8 bullish hedge fund positions. Caleres Inc (NYSE:CAL) 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 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 CAL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CAL were disappointed as the stock returned -6.5% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
