Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Chico’s FAS, Inc. (NYSE:CHS) changed recently.
Is Chico’s FAS, Inc. (NYSE:CHS) a buy here? The smart money is getting more bullish. The number of long hedge fund bets inched up by 1 recently. Our calculations also showed that CHS 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.
In the financial world there are a multitude of signals market participants put to use to appraise stocks. A couple of the most innovative signals are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform the market by a solid amount (see the details here).
Jim Simons of Renaissance Technologies
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. Let’s go over the latest hedge fund action regarding Chico’s FAS, Inc. (NYSE:CHS).
Hedge fund activity in Chico’s FAS, Inc. (NYSE:CHS)
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in CHS over the last 17 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
The largest stake in Chico’s FAS, Inc. (NYSE:CHS) was held by Renaissance Technologies, which reported holding $33.9 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $8 million position. Other investors bullish on the company included Miller Value Partners, Coatue Management, and Royce & Associates. In terms of the portfolio weights assigned to each position Lyon Street Capital allocated the biggest weight to Chico’s FAS, Inc. (NYSE:CHS), around 1.23% of its 13F portfolio. Antara Capital is also relatively very bullish on the stock, setting aside 0.57 percent of its 13F equity portfolio to CHS.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Maverick Capital, managed by Lee Ainslie, initiated the most outsized position in Chico’s FAS, Inc. (NYSE:CHS). Maverick Capital had $0.9 million invested in the company at the end of the quarter. Brian C. Freckmann’s Lyon Street Capital also initiated a $0.7 million position during the quarter. The other funds with brand new CHS positions are Dmitry Balyasny’s Balyasny Asset Management and Andrew Weiss’s Weiss Asset Management.
Let’s now take a look at hedge fund activity in other stocks similar to Chico’s FAS, Inc. (NYSE:CHS). These stocks are FRP Holdings Inc (NASDAQ:FRPH), Diamond Hill Investment Group, Inc. (NASDAQ:DHIL), American Vanguard Corp. (NYSE:AVD), and NRC Group Holdings Corp. (NYSE:NRCG). This group of stocks’ market valuations match CHS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FRPH | 8 | 39496 | 1 |
| DHIL | 15 | 46453 | 1 |
| AVD | 8 | 27502 | -3 |
| NRCG | 13 | 17546 | 5 |
| Average | 11 | 32749 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $33 million. That figure was $58 million in CHS’s case. Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) is the most popular stock in this table. On the other hand FRP Holdings Inc (NASDAQ:FRPH) is the least popular one with only 8 bullish hedge fund positions. Chico’s FAS, Inc. (NYSE:CHS) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on CHS as the stock returned 18.4% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
