Should I Avoid Crocs, Inc. (CROX)?

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Crocs, Inc. (NASDAQ:CROX).

Is Crocs, Inc. (NASDAQ:CROX) a healthy stock for your portfolio? The best stock pickers were becoming less hopeful. The number of bullish hedge fund positions dropped by 3 lately. Crocs, Inc. (NASDAQ:CROX) was in 37 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 41. Our calculations also showed that CROX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 40 hedge funds in our database with CROX holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to analyze the key hedge fund action regarding Crocs, Inc. (NASDAQ:CROX).

Bernard Horn of Polaris Capital Management

Do Hedge Funds Think CROX Is A Good Stock To Buy Now?

At the end of September, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the second quarter of 2021. By comparison, 35 hedge funds held shares or bullish call options in CROX a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Among these funds, Arrowstreet Capital held the most valuable stake in Crocs, Inc. (NASDAQ:CROX), which was worth $163.7 million at the end of the third quarter. On the second spot was Samlyn Capital which amassed $157.1 million worth of shares. Two Sigma Advisors, Polaris Capital Management, and Driehaus 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 Polaris Capital Management allocated the biggest weight to Crocs, Inc. (NASDAQ:CROX), around 3.56% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, earmarking 2.46 percent of its 13F equity portfolio to CROX.

Because Crocs, Inc. (NASDAQ:CROX) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers that elected to cut their full holdings in the third quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, comprising close to $21.8 million in stock, and Steven Boyd’s Armistice Capital was right behind this move, as the fund cut about $13.7 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 3 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Crocs, Inc. (NASDAQ:CROX) but similarly valued. These stocks are First Horizon Corporation (NYSE:FHN), Juniper Networks, Inc. (NYSE:JNPR), Oatly Group AB (NASDAQ:OTLY), Dolby Laboratories, Inc. (NYSE:DLB), Genpact Limited (NYSE:G), UGI Corp (NYSE:UGI), and Lamb Weston Holdings, Inc. (NYSE:LW). This group of stocks’ market caps match CROX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $1051 million in CROX’s case. Dolby Laboratories, Inc. (NYSE:DLB) is the most popular stock in this table. On the other hand Oatly Group AB (NASDAQ:OTLY) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Crocs, Inc. (NASDAQ:CROX) is more popular among hedge funds. Our overall hedge fund sentiment score for CROX is 79.1. 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. 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 returned 28.6% in 2021 through November 30th but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on CROX as the stock returned 14.3% since the end of September (through 11/30) 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.

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Disclosure: None. This article was originally published at Insider Monkey.