In this article we are going to use hedge fund sentiment as a tool and determine whether Callaway Golf Company (NYSE:ELY) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Callaway Golf Company (NYSE:ELY) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 40 hedge funds’ portfolios at the end of March. Our calculations also showed that ELY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as UP Fintech Holding Limited (NASDAQ:TIGR), First Midwest Bancorp Inc (NASDAQ:FMBI), and Barnes Group Inc. (NYSE:B) to gather more data points.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery 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. Now we’re going to view the key hedge fund action encompassing Callaway Golf Company (NYSE:ELY).
Do Hedge Funds Think ELY Is A Good Stock To Buy Now?
At first quarter’s end, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ELY over the last 23 quarters. So, let’s see 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, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Callaway Golf Company (NYSE:ELY). Fisher Asset Management has a $91.9 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $84.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions consist of James Woodson Davis’s Woodson Capital Management, Alexander Mitchell’s Scopus Asset Management and Malcolm Levine’s Dendur Capital. In terms of the portfolio weights assigned to each position Marlowe Partners allocated the biggest weight to Callaway Golf Company (NYSE:ELY), around 16.97% of its 13F portfolio. Dendur Capital is also relatively very bullish on the stock, dishing out 6.59 percent of its 13F equity portfolio to ELY.
Due to the fact that Callaway Golf Company (NYSE:ELY) has experienced bearish sentiment from hedge fund managers, it’s safe to say that there were a few hedgies who sold off their positions entirely by the end of the first quarter. At the top of the heap, Eric Bannasch’s Cadian Capital sold off the biggest stake of the 750 funds watched by Insider Monkey, valued at an estimated $83.8 million in stock, and Rob Citrone’s Discovery Capital Management was right behind this move, as the fund dropped about $20.1 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Callaway Golf Company (NYSE:ELY) but similarly valued. These stocks are UP Fintech Holding Limited (NASDAQ:TIGR), First Midwest Bancorp Inc (NASDAQ:FMBI), Barnes Group Inc. (NYSE:B), Jack in the Box Inc. (NASDAQ:JACK), Accolade, Inc. (NASDAQ:ACCD), Xencor Inc (NASDAQ:XNCR), and Medifast, Inc. (NYSE:MED). This group of stocks’ market valuations resemble ELY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TIGR | 14 | 103231 | 6 |
| FMBI | 13 | 114585 | -3 |
| B | 18 | 42924 | 6 |
| JACK | 30 | 302872 | -4 |
| ACCD | 19 | 471681 | -2 |
| XNCR | 16 | 269589 | 0 |
| MED | 22 | 287110 | 4 |
| Average | 18.9 | 227427 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.9 hedge funds with bullish positions and the average amount invested in these stocks was $227 million. That figure was $504 million in ELY’s case. Jack in the Box Inc. (NASDAQ:JACK) is the most popular stock in this table. On the other hand First Midwest Bancorp Inc (NASDAQ:FMBI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Callaway Golf Company (NYSE:ELY) is more popular among hedge funds. Our overall hedge fund sentiment score for ELY is 85. 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 19.3% in 2021 through June 25th but still managed to beat the market by 4.8 percentage points. Hedge funds were also right about betting on ELY as the stock returned 25.5% since the end of March (through 6/25) 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.
Follow Topgolf Callaway Brands Corp. (NYSE:MODG)
Follow Topgolf Callaway Brands Corp. (NYSE:MODG)
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Disclosure: None. This article was originally published at Insider Monkey.
