Insider Purchase Boosts Skechers USA Inc (SKX), But Hedge Funds Are Selling

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Skechers USA Inc (NYSE:SKX) has experienced a decrease in activity from the world’s largest hedge funds in recent months, with 10 fewer hedge funds owning shares on September 30 as did on March 31. 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 MDU Resources Group Inc (NYSE:MDU), Energen Corporation (NYSE:EGN), and ABIOMED, Inc. (NASDAQ:ABMD) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Hedge fund activity in Skechers USA Inc (NYSE:SKX)

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 19% from the previous quarter. Ownership of the stock among top hedge funds has fallen steeply throughout much of the last year. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, OZ Management, managed by Daniel S. Och, holds the largest position in Skechers USA Inc (NYSE:SKX). According to regulatory filings, the fund has a $68.2 million position in the stock. On OZ Management’s heels is AQR Capital Management, run by Cliff Asness, which holds a $41.7 million position. Some other professional money managers that are bullish include Joel Greenblatt’s Gotham Asset Management, David Keidan’s Buckingham Capital Management, and Jim Simons’ Renaissance Technologies.

Judging by the fact that Skechers USA Inc (NYSE:SKX) has faced falling interest from hedge fund managers, we can see that there exists a select few fund managers that slashed their entire stakes last quarter. Interestingly, Jacob Doft’s Highline Capital Management dumped the biggest position of the 700 funds watched by Insider Monkey, worth close to $75 million in stock. Ken Heebner’s fund, Capital Growth Management, also dropped its stock, about $62.1 million worth of SKX shares. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 5 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Skechers USA Inc (NYSE:SKX). We will take a look at MDU Resources Group Inc (NYSE:MDU), Energen Corporation (NYSE:EGN), ABIOMED, Inc. (NASDAQ:ABMD), and Williams-Sonoma, Inc. (NYSE:WSM). This group of stocks’ market valuations match SKX’s market valuation.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $466 million. That figure was $228 million in SKX’s case. Energen Corporation (NYSE:EGN) is the most popular stock in this table. On the other hand MDU Resources Group Inc (NYSE:MDU) is the least popular one with only 10 bullish hedge fund positions. Skechers USA Inc (NYSE:SKX) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on recently, not fleeing from. In this regard EGN might be a better candidate to consider a long position in at this time.

Disclosure: None