Is CRI Stock A Buy or Sell?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Carter’s, Inc. (NYSE:CRI).

Is CRI stock a buy? Carter’s, Inc. (NYSE:CRI) shareholders have witnessed a decrease in support from the world’s most elite money managers in recent months. Carter’s, Inc. (NYSE:CRI) was in 25 hedge funds’ portfolios at the end of December. The all time high for this statistic is 46. There were 26 hedge funds in our database with CRI positions at the end of the third quarter. Our calculations also showed that CRI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Joe Huber of Huber Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s take a look at the latest hedge fund action regarding Carter’s, Inc. (NYSE:CRI).

Do Hedge Funds Think CRI Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CRI over the last 22 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

Among these funds, Holocene Advisors held the most valuable stake in Carter’s, Inc. (NYSE:CRI), which was worth $52.5 million at the end of the fourth quarter. On the second spot was Polaris Capital Management which amassed $46.4 million worth of shares. Arrowstreet Capital, AQR Capital Management, and Diamond Hill Capital 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 Polaris Capital Management allocated the biggest weight to Carter’s, Inc. (NYSE:CRI), around 1.74% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, dishing out 0.82 percent of its 13F equity portfolio to CRI.

Due to the fact that Carter’s, Inc. (NYSE:CRI) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of money managers that elected to cut their entire stakes by the end of the fourth quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP sold off the biggest investment of all the hedgies tracked by Insider Monkey, valued at about $5.2 million in stock, and Lee Ainslie’s Maverick Capital was right behind this move, as the fund dropped about $4 million worth. These transactions are interesting, as total hedge fund interest was cut by 1 funds by the end of the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to Carter’s, Inc. (NYSE:CRI). These stocks are Proto Labs Inc (NYSE:PRLB), Silgan Holdings Inc. (NASDAQ:SLGN), Watts Water Technologies Inc (NYSE:WTS), New Relic Inc (NYSE:NEWR), The Chemours Company (NYSE:CC), ONE Gas Inc (NYSE:OGS), and Ardagh Group S.A. (NYSE:ARD). This group of stocks’ market valuations resemble CRI’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $431 million. That figure was $317 million in CRI’s case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 8 bullish hedge fund positions. Carter’s, Inc. (NYSE:CRI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CRI is 58.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately CRI wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on CRI were disappointed as the stock returned 4.5% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.