We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of December 31st. In this article, we look at what those funds think of Stitch Fix, Inc. (NASDAQ:SFIX) based on that data.
Stitch Fix, Inc. (NASDAQ:SFIX) has experienced an increase in activity from the world's largest hedge funds lately. SFIX was in 28 hedge funds' portfolios at the end of December. There were 23 hedge funds in our database with SFIX positions at the end of the previous quarter. Our calculations also showed that SFIX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Bill Miller of Miller Value Partners[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to take a glance at the latest hedge fund action regarding Stitch Fix, Inc. (NASDAQ:SFIX).
How have hedgies been trading Stitch Fix, Inc. (NASDAQ:SFIX)?
At Q4's end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in SFIX over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Stitch Fix, Inc. (NASDAQ:SFIX) was held by Miller Value Partners, which reported holding $66.5 million worth of stock at the end of September. It was followed by Steadfast Capital Management with a $58.2 million position. Other investors bullish on the company included Scopus Asset Management, Coatue Management, and Engle Capital. In terms of the portfolio weights assigned to each position Potrero Capital Research allocated the biggest weight to Stitch Fix, Inc. (NASDAQ:SFIX), around 5.52% of its 13F portfolio. Engle Capital is also relatively very bullish on the stock, dishing out 4.25 percent of its 13F equity portfolio to SFIX.
As aggregate interest increased, key money managers were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, assembled the most outsized position in Stitch Fix, Inc. (NASDAQ:SFIX). Scopus Asset Management had $37.8 million invested in the company at the end of the quarter. Philippe Laffont's Coatue Management also made a $28.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Christopher Lyle's SCGE Management, Ravee Mehta's Nishkama Capital, and Mike Vranos's Ellington.
Let's now review hedge fund activity in other stocks similar to Stitch Fix, Inc. (NASDAQ:SFIX). These stocks are Allegheny Technologies Incorporated (NYSE:ATI), Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA), Monro Muffler Brake Inc (NASDAQ:MNRO), and Halozyme Therapeutics, Inc. (NASDAQ:HALO). All of these stocks' market caps match SFIX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATI,27,146160,5 IBA,3,43174,-1 MNRO,18,171810,1 HALO,25,198183,-1 Average,18.25,139832,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $300 million in SFIX's case. Allegheny Technologies Incorporated (NYSE:ATI) is the most popular stock in this table. On the other hand Industrias Bachoco, S.A.B. de C.V. (NYSE:IBA) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Stitch Fix, Inc. (NASDAQ:SFIX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately SFIX wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SFIX were disappointed as the stock returned -46.5% during the first two and a half months of 2020 (through March 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.