Is Lululemon Athletica inc. (NASDAQ:LULU) a buy right now? The smart money is turning bullish. The number of long hedge fund bets increased by 4 in recent months.
To most market participants, hedge funds are perceived as unimportant, outdated financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open at present, we at Insider Monkey look at the masters of this group, around 450 funds. It is widely believed that this group controls the lion’s share of the hedge fund industry’s total asset base, and by keeping an eye on their highest performing stock picks, we have brought to light a number of investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).
Equally as integral, optimistic insider trading sentiment is a second way to parse down the world of equities. As the old adage goes: there are a variety of incentives for a bullish insider to sell shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several empirical studies have demonstrated the market-beating potential of this strategy if piggybackers know what to do (learn more here).
Keeping this in mind, it’s important to take a glance at the latest action surrounding Lululemon Athletica inc. (NASDAQ:LULU).
What have hedge funds been doing with Lululemon Athletica inc. (NASDAQ:LULU)?
In preparation for this year, a total of 19 of the hedge funds we track were bullish in this stock, a change of 27% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings significantly.
According to our comprehensive database, Stephen Mandel’s Lone Pine Capital had the largest position in Lululemon Athletica inc. (NASDAQ:LULU), worth close to $368.2 million, comprising 2.3% of its total 13F portfolio. The second largest stake is held by Patrick McCormack of Tiger Consumer Management, with a $69.6 million position; 3.2% of its 13F portfolio is allocated to the company. Remaining hedge funds with similar optimism include David Stemerman’s Conatus Capital Management, Donald Chiboucis’s Columbus Circle Investors and Ken Griffin’s Citadel Investment Group.
Now, key money managers were breaking ground themselves. Alydar Capital, managed by John Murphy, created the biggest call position in Lululemon Athletica inc. (NASDAQ:LULU). Alydar Capital had 15.2 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $11.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Steven Cohen’s SAC Capital Advisors, Steven Cohen’s SAC Capital Advisors, and SAC Subsidiary’s CR Intrinsic Investors.
What do corporate executives and insiders think about Lululemon Athletica inc. (NASDAQ:LULU)?
Insider purchases made by high-level executives is at its handiest when the company in question has experienced transactions within the past half-year. Over the last half-year time frame, Lululemon Athletica inc. (NASDAQ:LULU) has seen zero unique insiders buying, and 5 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to Lululemon Athletica inc. (NASDAQ:LULU). These stocks are Carter’s, Inc. (NYSE:CRI), Hanesbrands Inc. (NYSE:HBI), Gildan Activewear Inc (USA) (NYSE:GIL), Under Armour Inc (NYSE:UA), and PVH Corp (NYSE:PVH). This group of stocks belong to the textile – apparel clothing industry and their market caps resemble LULU’s market cap.
|Company Name||# of Hedge Funds||# of Insiders Buying||# of Insiders Selling|
|Carter’s, Inc. (NYSE:CRI)||30||0||1|
|Hanesbrands Inc. (NYSE:HBI)||17||0||6|
|Gildan Activewear Inc (USA) (NYSE:GIL)||18||0||0|
|Under Armour Inc (NYSE:UA)||13||0||6|
|PVH Corp (NYSE:PVH)||32||0||8|
With the returns demonstrated by the aforementioned research, retail investors should always watch hedge fund and insider trading sentiment, and Lululemon Athletica inc. (NASDAQ:LULU) is an important part of this process.
See the 7 most bullish money managers on the following pages: