Were Expert Investors Right About Macy’s, Inc. (M)?

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 Macy’s, Inc. (NYSE:M) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Macy’s, Inc. (NYSE:M) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. Macy’s, Inc. (NYSE:M) was in 41 hedge funds’ portfolios at the end of September. The all time high for this statistic is 67. Our calculations also showed that M 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 we’re going to take a look at the latest hedge fund action encompassing Macy’s, Inc. (NYSE:M).

Barry Rosenstein of JANA Partners

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

At third quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in M over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in Macy’s, Inc. (NYSE:M). Arrowstreet Capital has a $238.9 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is D E Shaw, managed by D. E. Shaw, which holds a $187.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism contain David Tepper’s Appaloosa Management LP, Stephen Mildenhall’s Contrarius Investment Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position JANA Partners allocated the biggest weight to Macy’s, Inc. (NYSE:M), around 8.36% of its 13F portfolio. Contrarius Investment Management is also relatively very bullish on the stock, earmarking 7.37 percent of its 13F equity portfolio to M.

As industrywide interest jumped, key hedge funds have been driving this bullishness. JANA Partners, managed by Barry Rosenstein, initiated the most outsized position in Macy’s, Inc. (NYSE:M). JANA Partners had $104.5 million invested in the company at the end of the quarter. Steven Tananbaum’s GoldenTree Asset Management also initiated a $36.8 million position during the quarter. The other funds with new positions in the stock are Kamyar Khajavi’s MIK Capital, Brian Scudieri’s Kehrs Ridge Capital, and Alexander Mitchell’s Scopus Asset Management.

Let’s also examine hedge fund activity in other stocks similar to Macy’s, Inc. (NYSE:M). We will take a look at Casey’s General Stores, Inc. (NASDAQ:CASY), Voya Financial Inc (NYSE:VOYA), Woori Financial Group Inc. (NYSE:WF), Chart Industries, Inc. (NYSE:GTLS), BlackLine, Inc. (NASDAQ:BL), Nielsen Holdings plc (NYSE:NLSN), and The Descartes Systems Group Inc (NASDAQ:DSGX). This group of stocks’ market caps are closest to M’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $531 million. That figure was $1479 million in M’s case. Voya Financial Inc (NYSE:VOYA) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Macy’s, Inc. (NYSE:M) is more popular among hedge funds. Our overall hedge fund sentiment score for M is 78.4. 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 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on M as the stock returned 14% since the end of September (through 1/31) 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.