Was The Smart Money Right About Crocs, Inc. (CROX)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Crocs, Inc. (NASDAQ:CROX) and determine whether the smart money was really smart about this stock.

Is Crocs, Inc. (NASDAQ:CROX) a buy right now? Prominent investors were reducing their bets on the stock. The number of long hedge fund bets fell by 3 in recent months. Crocs, Inc. (NASDAQ:CROX) was in 37 hedge funds’ portfolios at the end of September. 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 positions at the end of the second quarter.

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. Now let’s take a peek at the recent hedge fund action surrounding Crocs, Inc. (NASDAQ:CROX).

Robert Pohly of Samlyn Capital

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

At Q3’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in CROX over the last 25 quarters. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings significantly (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, dishing out 2.46 percent of its 13F equity portfolio to CROX.

Since Crocs, Inc. (NASDAQ:CROX) has witnessed falling interest from the smart money, it’s safe to say that there lies a certain “tier” of hedgies who were dropping their positions entirely last quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management sold off the largest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $21.8 million in stock. Steven Boyd’s fund, Armistice Capital, also sold off its stock, about $13.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 3 funds last quarter.

Let’s now review 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 values resemble CROX’s market value.

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 gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, CROX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CROX were disappointed as the stock returned -28.5% since the end of the third quarter (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.

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