Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Chewy, Inc. (NYSE:CHWY) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Chewy, Inc. (NYSE:CHWY) shareholders have witnessed a decrease in hedge fund interest recently. Chewy, Inc. (NYSE:CHWY) was in 32 hedge funds’ portfolios at the end of September. The all time high for this statistic is 46. Our calculations also showed that CHWY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
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 let’s take a gander at the recent hedge fund action regarding Chewy, Inc. (NYSE:CHWY).
Brad Farber of Atika Capital
Do Hedge Funds Think CHWY Is A Good Stock To Buy Now?
At third quarter’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CHWY over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Chewy, Inc. (NYSE:CHWY) was held by Zevenbergen Capital Investments, which reported holding $77.1 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $58.7 million position. Other investors bullish on the company included Marshall Wace LLP, Two Sigma Advisors, and Tremblant Capital. In terms of the portfolio weights assigned to each position Berylson Capital Partners allocated the biggest weight to Chewy, Inc. (NYSE:CHWY), around 8.95% of its 13F portfolio. Rip Road Capital is also relatively very bullish on the stock, dishing out 5.41 percent of its 13F equity portfolio to CHWY.
Since Chewy, Inc. (NYSE:CHWY) has experienced a decline in interest from the smart money, logic holds that there lies a certain “tier” of fund managers that decided to sell off their positions entirely last quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $13 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $10.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 11 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Chewy, Inc. (NYSE:CHWY) but similarly valued. These stocks are United Microelectronics Corp (NYSE:UMC), Eversource Energy (NYSE:ES), Las Vegas Sands Corp. (NYSE:LVS), Yandex NV (NASDAQ:YNDX), Synchrony Financial (NYSE:SYF), WEC Energy Group, Inc. (NYSE:WEC), and Occidental Petroleum Corporation (NYSE:OXY). This group of stocks’ market valuations resemble CHWY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UMC | 13 | 151038 | 3 |
| ES | 21 | 137293 | -5 |
| LVS | 40 | 938057 | -8 |
| YNDX | 27 | 1432186 | -4 |
| SYF | 35 | 1376950 | -4 |
| WEC | 31 | 432498 | 4 |
| OXY | 60 | 3189745 | 3 |
| Average | 32.4 | 1093967 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $1094 million. That figure was $376 million in CHWY’s case. Occidental Petroleum Corporation (NYSE:OXY) is the most popular stock in this table. On the other hand United Microelectronics Corp (NYSE:UMC) is the least popular one with only 13 bullish hedge fund positions. Chewy, Inc. (NYSE:CHWY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CHWY is 35.1. 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 negative signal and 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 29.6% in 2021 and surpassed the market again by 3.6 percentage points. Unfortunately, CHWY wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CHWY investors were disappointed as the stock returned -30.1% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Chewy Inc. (NYSE:CHWY)
Follow Chewy Inc. (NYSE:CHWY)
Suggested Articles:
- 10 Best Tech Stocks to Buy Right Now Under $10
- 15 Biggest Waste Management Companies
- 25 Largest Lakes In The US
Disclosure: None. This article was originally published at Insider Monkey.
