The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Coty Inc (NYSE:COTY).
Coty Inc (NYSE:COTY) investors should be aware of an increase in enthusiasm from smart money lately. COTY was in 24 hedge funds’ portfolios at the end of March. There were 19 hedge funds in our database with COTY holdings at the end of the previous quarter. Our calculations also showed that coty isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to review the latest hedge fund action surrounding Coty Inc (NYSE:COTY).
What does the smart money think about Coty Inc (NYSE:COTY)?
Heading into the second quarter of 2019, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from the previous quarter. The graph below displays the number of hedge funds with bullish position in COTY over the last 15 quarters. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Millennium Management was the largest shareholder of Coty Inc (NYSE:COTY), with a stake worth $463 million reported as of the end of March. Trailing Millennium Management was Empyrean Capital Partners, which amassed a stake valued at $51.8 million. Diamond Hill Capital, Alyeska Investment Group, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, established the biggest position in Coty Inc (NYSE:COTY). Empyrean Capital Partners had $51.8 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $26.1 million position during the quarter. The following funds were also among the new COTY investors: Israel Englander’s Millennium Management, Andrew Weiss’s Weiss Asset Management, and Andrew Hahn’s Ursa Fund Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Coty Inc (NYSE:COTY) but similarly valued. We will take a look at Huntington Ingalls Industries Inc (NYSE:HII), OGE Energy Corp. (NYSE:OGE), American Financial Group, Inc. (NYSE:AFG), and Teledyne Technologies Incorporated (NYSE:TDY). This group of stocks’ market valuations are closest to COTY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HII | 31 | 708221 | 4 |
| OGE | 17 | 265837 | 1 |
| AFG | 30 | 316813 | 1 |
| TDY | 28 | 596871 | 8 |
| Average | 26.5 | 471936 | 3.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $472 million. That figure was $689 million in COTY’s case. Huntington Ingalls Industries Inc (NYSE:HII) is the most popular stock in this table. On the other hand OGE Energy Corp. (NYSE:OGE) is the least popular one with only 17 bullish hedge fund positions. Coty Inc (NYSE:COTY) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on COTY as the stock returned 9.3% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
