We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Skechers USA Inc (NYSE:SKX) based on that data.
Skechers USA Inc (NYSE:SKX) was in 30 hedge funds’ portfolios at the end of the fourth quarter of 2019. SKX shareholders have witnessed an increase in hedge fund interest in recent months. There were 28 hedge funds in our database with SKX positions at the end of the previous quarter. Our calculations also showed that SKX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
At the moment there are tons of methods stock market investors employ to value stocks. A couple of the best methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the best investment managers can beat their index-focused peers by a significant margin (see the details here).
Paul Marshall of Marshall Wace
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a glance at the latest hedge fund action encompassing Skechers USA Inc (NYSE:SKX).
What does smart money think about Skechers USA Inc (NYSE:SKX)?
At the end of the fourth quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in SKX a year ago. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in Skechers USA Inc (NYSE:SKX). AQR Capital Management has a $206.6 million position in the stock, comprising 0.2% of its 13F portfolio. On AQR Capital Management’s heels is Tremblant Capital, managed by Brett Barakett, which holds a $98.3 million position; the fund has 4.9% of its 13F portfolio invested in the stock. Remaining peers that are bullish comprise Paul Marshall and Ian Wace’s Marshall Wace LLP, Renaissance Technologies and Jack Woodruff’s Candlestick Capital Management. In terms of the portfolio weights assigned to each position Tremblant Capital allocated the biggest weight to Skechers USA Inc (NYSE:SKX), around 4.89% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, dishing out 4.62 percent of its 13F equity portfolio to SKX.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Candlestick Capital Management, managed by Jack Woodruff, initiated the most valuable position in Skechers USA Inc (NYSE:SKX). Candlestick Capital Management had $36.6 million invested in the company at the end of the quarter. Kamyar Khajavi’s MIK Capital also made a $11.5 million investment in the stock during the quarter. The following funds were also among the new SKX investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Brad Stephens’s Six Columns Capital, and Richard Driehaus’s Driehaus Capital.
Let’s check out hedge fund activity in other stocks similar to Skechers USA Inc (NYSE:SKX). We will take a look at Grupo Televisa SAB (NYSE:TV), Entegris Inc (NASDAQ:ENTG), Reata Pharmaceuticals, Inc. (NASDAQ:RETA), and Dr. Reddy’s Laboratories Limited (NYSE:RDY). All of these stocks’ market caps are similar to SKX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TV | 19 | 995016 | 4 |
| ENTG | 24 | 775840 | -6 |
| RETA | 29 | 651033 | 7 |
| RDY | 12 | 109916 | -1 |
| Average | 21 | 632951 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $633 million. That figure was $653 million in SKX’s case. Reata Pharmaceuticals, Inc. (NASDAQ:RETA) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (NYSE:RDY) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Skechers USA Inc (NYSE:SKX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately SKX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SKX were disappointed as the stock returned -50.9% during the first two and a half months of 2020 (through March 16th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
