Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Is NIKE, Inc. (NYSE:NKE) ready to rally soon? Hedge funds are taking an optimistic view. The number of bullish hedge fund bets increased by 10 recently. Our calculations also showed that NKE isn’t among the 30 most popular stocks among hedge funds.
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 the 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to analyze the latest hedge fund action surrounding NIKE, Inc. (NYSE:NKE).
What have hedge funds been doing with NIKE, Inc. (NYSE:NKE)?
At Q3’s end, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 28% from one quarter earlier. The graph below displays the number of hedge funds with a bullish position in NKE over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Orbis Investment Management was the largest shareholder of NIKE, Inc. (NYSE:NKE), with a stake worth $594.8 million reported as of the end of September. Trailing Orbis Investment Management was Two Sigma Advisors, which amassed a stake valued at $229.5 million. Millennium Management, Citadel Investment Group, and Adage Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names have jumped into NIKE, Inc. (NYSE:NKE) headfirst. Coatue Management, managed by Philippe Laffont, created the most valuable position in NIKE, Inc. Coatue Management had $115 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $38.8 million position during the quarter. The following funds were also among the new NKE investors: Jim Simons’s Renaissance Technologies, Richard Driehaus’s Driehaus Capital, and Lei Zhang’s Hillhouse Capital Management.
Let’s also examine hedge fund activity in other stocks similar to NIKE, Inc. (NYSE:NKE). We will take a look at Amgen, Inc. (NASDAQ:AMGN), Medtronic, Inc. (NYSE:MDT), BHP Group Limited (NYSE:BHP), and Adobe Inc. (NASDAQ:ADBE). This group of stocks’ market values resembles NKE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMGN | 42 | 2892393 | 3 |
| MDT | 53 | 2507997 | 18 |
| BHP | 19 | 617958 | 7 |
| ADBE | 79 | 7922225 | 12 |
| Average | 48.25 | 3485 | 10 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 48.25 hedge funds with bullish positions and the average amount invested in these stocks was $3485 million. That figure was $1918 million in NKE’s case. Adobe Systems Incorporated (NASDAQ:ADBE) is the most popular stock in this table. On the other hand, BHP Group Limited (NYSE:BHP) is the least popular one with only 19 bullish hedge fund positions. NIKE, Inc. (NYSE:NKE) 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, ADBE might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
