Were Hedge Funds Right About Foot Locker, Inc. (FL)?

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 third 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 6 years and analyze what the smart money thinks of Foot Locker, Inc. (NYSE:FL) based on that data and determine whether they were really smart about the stock.

Foot Locker, Inc. (NYSE:FL) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 38. FL has experienced a decrease in hedge fund sentiment lately. There were 31 hedge funds in our database with FL positions at the end of the second quarter. Our calculations also showed that FL 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. Now we’re going to take a glance at the new hedge fund action regarding Foot Locker, Inc. (NYSE:FL).

Cliff Asness of AQR Capital Management

Do Hedge Funds Think FL 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 held long positions in this stock, a change of -3% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FL over the last 25 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

More specifically, Vesa Equity Investment was the largest shareholder of Foot Locker, Inc. (NYSE:FL), with a stake worth $582.2 million reported as of the end of September. Trailing Vesa Equity Investment was Arrowstreet Capital, which amassed a stake valued at $102.6 million. Citadel Investment Group, Millennium Management, and AQR Capital Management 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 Vesa Equity Investment allocated the biggest weight to Foot Locker, Inc. (NYSE:FL), around 100% of its 13F portfolio. Wallace Capital Management is also relatively very bullish on the stock, earmarking 1.5 percent of its 13F equity portfolio to FL.

Judging by the fact that Foot Locker, Inc. (NYSE:FL) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few hedge funds that slashed their positions entirely by the end of the third quarter. It’s worth mentioning that Steven Boyd’s Armistice Capital said goodbye to the largest position of all the hedgies tracked by Insider Monkey, totaling about $31.1 million in stock, and Malcolm Levine’s Dendur Capital was right behind this move, as the fund said goodbye to about $20.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Foot Locker, Inc. (NYSE:FL) but similarly valued. We will take a look at Lazard Ltd (NYSE:LAZ), Ionis Pharmaceuticals, Inc. (NASDAQ:IONS), Cloudera, Inc. (NYSE:CLDR), Fastly, Inc. (NYSE:FSLY), Travel + Leisure Co. (NYSE:TNL), Atotech Limited (NYSE:ATC), and United Bankshares, Inc. (NASDAQ:UBSI). All of these stocks’ market caps are similar to FL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $657 million. That figure was $1051 million in FL’s case. Travel + Leisure Co. (NYSE:TNL) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 14 bullish hedge fund positions. Foot Locker, Inc. (NYSE:FL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FL is 69.8. 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 positive signal but 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 beat the market again by 3.6 percentage points. Unfortunately, FL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FL were disappointed as the stock returned -0.8% 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.

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