At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Stitch Fix, Inc. (NASDAQ:SFIX) makes for a good investment right now.
Is Stitch Fix, Inc. (NASDAQ:SFIX) a good stock to buy now? The best stock pickers are taking a bearish view. The number of bullish hedge fund bets retreated by 5 in recent months. Our calculations also showed that SFIX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). SFIX was in 23 hedge funds’ portfolios at the end of the third quarter of 2019. There were 28 hedge funds in our database with SFIX positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Bill Miller of Miller Value 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 analyze the fresh hedge fund action regarding Stitch Fix, Inc. (NASDAQ:SFIX).
How are hedge funds trading Stitch Fix, Inc. (NASDAQ:SFIX)?
Heading into the fourth quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the second quarter of 2019. On the other hand, there were a total of 21 hedge funds with a bullish position in SFIX a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Steadfast Capital Management was the largest shareholder of Stitch Fix, Inc. (NASDAQ:SFIX), with a stake worth $44.5 million reported as of the end of September. Trailing Steadfast Capital Management was Miller Value Partners, which amassed a stake valued at $31.6 million. Renaissance Technologies, Luxor Capital Group, and Greenlea Lane 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 Greenlea Lane Capital allocated the biggest weight to Stitch Fix, Inc. (NASDAQ:SFIX), around 3.41% of its 13F portfolio. Potrero Capital Research is also relatively very bullish on the stock, earmarking 2.21 percent of its 13F equity portfolio to SFIX.
Judging by the fact that Stitch Fix, Inc. (NASDAQ:SFIX) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there were a few hedge funds who were dropping their entire stakes in the third quarter. At the top of the heap, Peter S. Park’s Park West Asset Management said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, comprising an estimated $30.4 million in stock. James Woodson Davis’s fund, Woodson Capital Management, also sold off its stock, about $25.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 5 funds in the third quarter.
Let’s also examine hedge fund activity in other stocks similar to Stitch Fix, Inc. (NASDAQ:SFIX). These stocks are Sogou Inc. (NYSE:SOGO), Matador Resources Co (NYSE:MTDR), Four Corners Property Trust, Inc. (NYSE:FCPT), and Fabrinet (NYSE:FN). This group of stocks’ market caps resemble SFIX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SOGO | 4 | 5194 | -1 |
| MTDR | 14 | 224980 | 2 |
| FCPT | 17 | 120222 | -4 |
| FN | 21 | 175848 | -4 |
| Average | 14 | 131561 | -1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $132 million. That figure was $125 million in SFIX’s case. Fabrinet (NYSE:FN) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Stitch Fix, Inc. (NASDAQ:SFIX) is more popular among hedge funds. 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 SFIX as the stock returned 22.5% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
