Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards V.F. Corporation (NYSE:VFC).
Is V.F. Corporation (NYSE:VFC) a splendid investment now? The smart money is in an optimistic mood. The number of bullish hedge fund bets improved by 8 lately. Our calculations also showed that VFC isn’t among the 30 most popular stocks among hedge funds.
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 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 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s analyze the latest hedge fund action encompassing V.F. Corporation (NYSE:VFC).
What does the smart money think about V.F. Corporation (NYSE:VFC)?
Heading into the fourth quarter of 2018, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in VFC heading into this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Arrowstreet Capital held the most valuable stake in V.F. Corporation (NYSE:VFC), which was worth $347.1 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $249.7 million worth of shares. Moreover, Two Sigma Advisors, Citadel Investment Group, and D E Shaw were also bullish on V.F. Corporation (NYSE:VFC), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key money managers have jumped into V.F. Corporation (NYSE:VFC) headfirst. Renaissance Technologies, managed by Jim Simons, established the largest position in V.F. Corporation (NYSE:VFC). Renaissance Technologies had $43.4 million invested in the company at the end of the quarter. Ken Heebner’s Capital Growth Management also initiated a $42.1 million position during the quarter. The following funds were also among the new VFC investors: Phill Gross and Robert Atchinson’s Adage Capital Management, Principal Global Investors’s Columbus Circle Investors, and Charles Davidson and Joseph Jacobs’s Wexford Capital.
Let’s now take a look at hedge fund activity in other stocks similar to V.F. Corporation (NYSE:VFC). These stocks are Ross Stores, Inc. (NASDAQ:ROST), Ford Motor Company (NYSE:F), Electronic Arts Inc. (NASDAQ:EA), and TransCanada Corporation (NYSE:TRP). This group of stocks’ market values are similar to VFC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROST | 31 | 966231 | 4 |
| F | 30 | 991693 | -2 |
| EA | 79 | 4497231 | 0 |
| TRP | 14 | 229372 | 2 |
| Average | 38.5 | 1671132 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.5 hedge funds with bullish positions and the average amount invested in these stocks was $1671 million. That figure was $1289 million in VFC’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand TransCanada Corporation (NYSE:TRP) is the least popular one with only 14 bullish hedge fund positions. V.F. Corporation (NYSE:VFC) 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 EA might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
