Abercrombie & Fitch Co. (ANF): Are Hedge Funds Right About This Stock?

Billionaire hedge fund managers such as Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

Is Abercrombie & Fitch Co. (NYSE:ANF) a buy here? The best stock pickers are in a pessimistic mood. The number of bullish hedge fund positions dropped by 13 recently. ANFwas in 17 hedge funds’ portfolios at the end of the third quarter of 2016. There were 30 hedge funds in our database with ANF positions at the end of the previous quarter. 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 BroadSoft Inc (NASDAQ:BSFT), First Financial Bancorp (NASDAQ:FFBC), and Super Micro Computer, Inc. (NASDAQ:SMCI) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year, involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs.

Now, we’re going to check out the key action encompassing Abercrombie & Fitch Co. (NYSE:ANF).

Hedge fund activity in Abercrombie & Fitch Co. (NYSE:ANF)

At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a plunge of 43% from the second quarter of 2016. On the other hand, there were a total of 29 hedge funds with a bullish position in ANF at the beginning of this year. So, let’s review 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, Glenhill Advisors, led by Glenn J. Krevlin, holds the biggest position in Abercrombie & Fitch Co. (NYSE:ANF). According to regulatory filings, the fund has a $46 million position in the stock, comprising 2.8% of its 13F portfolio. On Glenhill Advisors’s heels is Cliff Asness of AQR Capital Management, with a $43.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions comprise Philippe Jabre’s Jabre Capital Partners, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and David Costen Haley’s HBK Investments. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dumped their positions entirely. Interestingly, Brett Barakett’s Tremblant Capital dumped the largest investment of the 700 funds tracked by Insider Monkey, comprising about $15.1 million in call options. Alexander Mitchell’s fund, Scopus Asset Management, also sold off its call options, worth about $8 million.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Abercrombie & Fitch Co. (NYSE:ANF) but similarly valued. These stocks are BroadSoft Inc (NASDAQ:BSFT), First Financial Bancorp (NASDAQ:FFBC), Super Micro Computer, Inc. (NASDAQ:SMCI), and Independent Bank Corp (NASDAQ:INDB). All of these stocks’ market caps match ANF’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $172 million in ANF’s case. BroadSoft Inc (NASDAQ:BSFT) is the most popular stock in this table. On the other hand Independent Bank Corp (NASDAQ:INDB) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Abercrombie & Fitch Co. (NYSE:ANF) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none.