Were Hedge Funds Right About Macy’s, Inc. (M)?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Macy’s, Inc. (NYSE:M).

Macy’s, Inc. (NYSE:M) was in 35 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 67. M investors should pay attention to an increase in enthusiasm from smart money in recent months. There were 31 hedge funds in our database with M positions at the end of the first quarter. Our calculations also showed that M isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Steven Tananbaum of GoldenTree Asset Management

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 are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding Macy’s, Inc. (NYSE:M).

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

At Q2’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from one quarter earlier. By comparison, 36 hedge funds held shares or bullish call options in M a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, GoldenTree Asset Management was the largest shareholder of Macy’s, Inc. (NYSE:M), with a stake worth $177.5 million reported as of the end of June. Trailing GoldenTree Asset Management was Yacktman Asset Management, which amassed a stake valued at $157.1 million. Arrowstreet Capital, Two Sigma Advisors, and Contrarius Investment 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 GoldenTree Asset Management allocated the biggest weight to Macy’s, Inc. (NYSE:M), around 4.71% of its 13F portfolio. Contrarius Investment Management is also relatively very bullish on the stock, designating 4.71 percent of its 13F equity portfolio to M.

As aggregate interest increased, key money managers have jumped into Macy’s, Inc. (NYSE:M) headfirst. GoldenTree Asset Management, managed by Steven Tananbaum, created the most outsized call position in Macy’s, Inc. (NYSE:M). GoldenTree Asset Management had $177.5 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also made a $47.4 million investment in the stock during the quarter. The other funds with brand new M positions are Steven Tananbaum’s GoldenTree Asset Management, Michael Zimmerman’s Prentice Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s go over hedge fund activity in other stocks similar to Macy’s, Inc. (NYSE:M). We will take a look at Douglas Emmett, Inc. (NYSE:DEI), Huntsman Corporation (NYSE:HUN), Valvoline Inc. (NYSE:VVV), Clover Health Investments, Corp. (NASDAQ:CLOV), HUTCHMED (China) Limited (NASDAQ:HCM), The Descartes Systems Group Inc (NASDAQ:DSGX), and Healthcare Trust Of America Inc (NYSE:HTA). This group of stocks’ market caps are similar to M’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.4 hedge funds with bullish positions and the average amount invested in these stocks was $514 million. That figure was $1023 million in M’s case. Huntsman Corporation (NYSE:HUN) is the most popular stock in this table. On the other hand HUTCHMED (China) Limited (NASDAQ:HCM) is the least popular one with only 10 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 74.7. 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 returned 29.6% in 2021 through November 5th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on M as the stock returned 66.5% since the end of June (through 11/5) 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.