The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Fossil Group Inc (NASDAQ:FOSL) from the perspective of those successful funds.
Is Fossil Group Inc (NASDAQ:FOSL) a sound stock to buy now? Money managers seem to be in a pessimistic mood. During the third quarter, the number of funds tracked by Insider Monkey bullish on Fossil declined by five to 15. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Seaspan Corporation (NYSE:SSW), Community Health Systems (NYSE:CYH), and La Quinta Holdings Inc (NYSE:LQ) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, let’s take a peek at the latest action surrounding Fossil Group Inc (NASDAQ:FOSL).
How have hedgies been trading Fossil Group Inc (NASDAQ:FOSL)?
At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, which represents a decline of 25% from the end of the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in FOSL over the last five quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Citadel Investment Group, led by Ken Griffin, holds the largest position in Fossil Group Inc (NASDAQ:FOSL). Citadel Investment Group has a $30 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Wallace Weitz’s Wallace R. Weitz & Co., which disclosed a $22.3 million position; 0.8% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions encompass Matt Sirovich and Jeremy Mindich’s Scopia Capital, David E. Shaw’s D E Shaw, and Josh Resnick’s Jericho Capital Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cashed in their entire stakes in the stock during the third quarter. It’s worth mentioning that Ricky Sandler’s Eminence Capital cashed in the largest investment of all the investors monitored by Insider Monkey, valued at an estimated $61 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also cut its stock, about $16.1 million worth.
Let’s go over hedge fund activity in other stocks similar to Fossil Group Inc (NASDAQ:FOSL). These stocks are Seaspan Corporation (NYSE:SSW), Community Health Systems (NYSE:CYH), La Quinta Holdings Inc (NYSE:LQ), and 2U Inc (NASDAQ:TWOU). This group of stocks’ market valuations are similar to FOSL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SSW | 7 | 21195 | 0 |
| CYH | 37 | 275553 | 4 |
| LQ | 14 | 244572 | 0 |
| TWOU | 15 | 70739 | 3 |
As you can see these stocks had an average of 18 funds with bullish positions and the average amount invested in these stocks was $153 million. That figure was $119 million in FOSL’s case. Community Health Systems (NYSE:CYH) is the most popular stock in this table, while Seaspan Corporation (NYSE:SSW) is the least popular one with only seven investors holding shares. Fossil Group Inc (NASDAQ:FOSL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard Community Health Systems (NYSE:CYH) might be a better candidate to consider taking a long position in.
Disclosure: none
