In this article we are going to use hedge fund sentiment as a tool and determine whether V.F. Corporation (NYSE:VFC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is V.F. Corporation (NYSE:VFC) a good stock to buy? The smart money was buying. The number of bullish hedge fund bets improved by 1 in recent months. V.F. Corporation (NYSE:VFC) was in 32 hedge funds’ portfolios at the end of June. The all time high for this statistic is 36. Our calculations also showed that VFC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 31 hedge funds in our database with VFC positions at the end of the first quarter.
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 S&P 500 ETFs by 79 percentage points since March 2017 (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.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a look at the new hedge fund action encompassing V.F. Corporation (NYSE:VFC).
Do Hedge Funds Think VFC Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in VFC over the last 24 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Diamond Hill Capital was the largest shareholder of V.F. Corporation (NYSE:VFC), with a stake worth $444.4 million reported as of the end of June. Trailing Diamond Hill Capital was Arrowstreet Capital, which amassed a stake valued at $177 million. Point72 Asset Management, Candlestick Capital Management, and Renaissance Technologies 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 Kehrs Ridge Capital allocated the biggest weight to V.F. Corporation (NYSE:VFC), around 3.35% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, setting aside 2.76 percent of its 13F equity portfolio to VFC.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Galibier Capital Management, managed by Joseph Sirdevan, assembled the largest position in V.F. Corporation (NYSE:VFC). Galibier Capital Management had $20.5 million invested in the company at the end of the quarter. Brian Scudieri’s Kehrs Ridge Capital also initiated a $8.2 million position during the quarter. The following funds were also among the new VFC investors: Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Anthony Joseph Vaccarino’s North Fourth Asset Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as V.F. Corporation (NYSE:VFC) but similarly valued. We will take a look at AutoZone, Inc. (NYSE:AZO), Datadog, Inc. (NASDAQ:DDOG), NatWest Group plc (NYSE:NWG), Valero Energy Corporation (NYSE:VLO), Liberty Broadband Corp (NASDAQ:LBRDA), BeiGene, Ltd. (NASDAQ:BGNE), and Skyworks Solutions Inc (NASDAQ:SWKS). This group of stocks’ market valuations are closest to VFC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AZO | 34 | 545700 | 0 |
| DDOG | 56 | 3235244 | 12 |
| NWG | 5 | 6649 | -1 |
| VLO | 38 | 259399 | -3 |
| LBRDA | 28 | 904867 | 5 |
| BGNE | 21 | 6192135 | 2 |
| SWKS | 37 | 924180 | 4 |
| Average | 31.3 | 1724025 | 2.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.3 hedge funds with bullish positions and the average amount invested in these stocks was $1724 million. That figure was $1006 million in VFC’s case. Datadog, Inc. (NASDAQ:DDOG) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 5 bullish hedge fund positions. V.F. Corporation (NYSE:VFC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for VFC is 59.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately VFC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on VFC were disappointed as the stock returned -9.7% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
