Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Callaway Golf Company (NYSE:ELY) in this article.
Is Callaway Golf Company (NYSE:ELY) a healthy stock for your portfolio? The best stock pickers are taking a pessimistic view. The number of long hedge fund bets were trimmed by 1 lately. Our calculations also showed that ELY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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.
Barry Rosenstein of JANA Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the new hedge fund action regarding Callaway Golf Company (NYSE:ELY).
What does smart money think about Callaway Golf Company (NYSE:ELY)?
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in ELY a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, JANA Partners held the most valuable stake in Callaway Golf Company (NYSE:ELY), which was worth $168.3 million at the end of the third quarter. On the second spot was Millennium Management which amassed $22.6 million worth of shares. Citadel Investment Group, 13D Management, and DC Capital Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position JANA Partners allocated the biggest weight to Callaway Golf Company (NYSE:ELY), around 13.56% of its 13F portfolio. Empirical Capital Partners is also relatively very bullish on the stock, designating 10.63 percent of its 13F equity portfolio to ELY.
Judging by the fact that Callaway Golf Company (NYSE:ELY) has witnessed a decline in interest from the smart money, it’s easy to see that there were a few money managers who sold off their positions entirely by the end of the third quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace dumped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $11.5 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also said goodbye to its stock, about $2.1 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Callaway Golf Company (NYSE:ELY). We will take a look at Portola Pharmaceuticals Inc (NASDAQ:PTLA), Hope Bancorp, Inc. (NASDAQ:HOPE), Dril-Quip, Inc. (NYSE:DRQ), and WillScot Corporation (NASDAQ:WSC). All of these stocks’ market caps are similar to ELY’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PTLA | 20 | 293177 | 2 |
| HOPE | 14 | 68754 | -1 |
| DRQ | 18 | 160339 | 0 |
| WSC | 24 | 213487 | 1 |
| Average | 19 | 183939 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $184 million. That figure was $288 million in ELY’s case. WillScot Corporation (NASDAQ:WSC) is the most popular stock in this table. On the other hand Hope Bancorp, Inc. (NASDAQ:HOPE) is the least popular one with only 14 bullish hedge fund positions. Callaway Golf Company (NYSE:ELY) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on ELY, though not to the same extent, as the stock returned 7.1% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
