It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Urban Outfitters, Inc. (NASDAQ:URBN).
Urban Outfitters, Inc. (NASDAQ:URBN) shares didn’t see a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 25 hedge funds’ portfolios at the end of the third quarter of 2016. 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 Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Texas Roadhouse Inc (NASDAQ:TXRH), and Ubiquiti Networks Inc (NASDAQ:UBNT) 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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How are hedge funds trading Urban Outfitters, Inc. (NASDAQ:URBN)?
Heading into the fourth quarter of 2016, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged from the previous quarter after several volatile quarters of hedge fund ownership. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the number one position in Urban Outfitters, Inc. (NASDAQ:URBN). AQR Capital Management has a $93.2 million position in the stock. Coming in second is D E Shaw, with a $36.3 million position. Remaining hedge funds and institutional investors with similar optimism contain Jim Simons’ Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Israel Englander’s Millennium Management.
Due to the fact that Urban Outfitters, Inc. (NASDAQ:URBN) has faced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few hedgies that elected to cut their entire stakes heading into Q4. Interestingly, Gregg Moskowitz’s Interval Partners dropped the largest investment of all the hedgies monitored by Insider Monkey, totaling about $27.5 million in call options.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Urban Outfitters, Inc. (NASDAQ:URBN) but similarly valued. These stocks are Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Texas Roadhouse Inc (NASDAQ:TXRH), Ubiquiti Networks Inc (NASDAQ:UBNT), and First Horizon National Corporation (NYSE:FHN). This group of stocks’ market caps are similar to URBN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TTWO | 46 | 1228866 | -1 |
| TXRH | 21 | 186122 | 7 |
| UBNT | 15 | 272438 | 1 |
| FHN | 17 | 262442 | -3 |
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $487 million. That figure was $272 million in URBN’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Ubiquiti Networks Inc (NASDAQ:UBNT) is the least popular one with only 15 bullish hedge fund positions. Urban Outfitters, Inc. (NASDAQ:URBN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TTWO might be a better candidate to consider a long position in.
Disclosure: None
