How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Stitch Fix, Inc. (NASDAQ:SFIX) and determine whether hedge funds had an edge regarding this stock.
Stitch Fix, Inc. (NASDAQ:SFIX) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. Stitch Fix, Inc. (NASDAQ:SFIX) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that SFIX 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 review the fresh hedge fund action surrounding Stitch Fix, Inc. (NASDAQ:SFIX).
Do Hedge Funds Think SFIX Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in SFIX a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, David Greenspan’s Slate Path Capital has the biggest position in Stitch Fix, Inc. (NASDAQ:SFIX), worth close to $119.1 million, accounting for 5.4% of its total 13F portfolio. The second largest stake is held by D E Shaw, managed by D. E. Shaw, which holds a $85.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include Philippe Laffont’s Coatue Management, Bill Miller’s Miller Value Partners and Paul Marshall and Ian Wace’s Marshall Wace LLP. In terms of the portfolio weights assigned to each position Marathon Partners allocated the biggest weight to Stitch Fix, Inc. (NASDAQ:SFIX), around 12.59% of its 13F portfolio. Slate Path Capital is also relatively very bullish on the stock, earmarking 5.44 percent of its 13F equity portfolio to SFIX.
Due to the fact that Stitch Fix, Inc. (NASDAQ:SFIX) has faced a decline in interest from the smart money, we can see that there lies a certain “tier” of funds that decided to sell off their entire stakes last quarter. Interestingly, Lee Ainslie’s Maverick Capital dumped the biggest investment of the 750 funds tracked by Insider Monkey, valued at an estimated $2.8 million in stock. Donald Sussman’s fund, Paloma Partners, also sold off its stock, about $1.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 5 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Stitch Fix, Inc. (NASDAQ:SFIX). We will take a look at Carter’s, Inc. (NYSE:CRI), Insperity Inc (NYSE:NSP), Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE), Companhia Energetica Minas Gerais (NYSE:CIG), FireEye Inc (NASDAQ:FEYE), Quaker Chemical Corp (NYSE:KWR), and Kemper Corporation (NYSE:KMPR). This group of stocks’ market values are similar to SFIX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRI | 24 | 309046 | 3 |
| NSP | 18 | 211562 | -2 |
| CERE | 13 | 365384 | -6 |
| CIG | 11 | 66465 | -4 |
| FEYE | 19 | 174446 | -10 |
| KWR | 14 | 137517 | -1 |
| KMPR | 7 | 55874 | -6 |
| Average | 15.1 | 188613 | -3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $601 million in SFIX’s case. Carter’s, Inc. (NYSE:CRI) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Stitch Fix, Inc. (NASDAQ:SFIX) is more popular among hedge funds. Our overall hedge fund sentiment score for SFIX is 75.7. 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, SFIX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SFIX were disappointed as the stock returned -58.9% 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.
Follow Stitch Fix Inc. (NASDAQ:SFIX)
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Disclosure: None. This article was originally published at Insider Monkey.
