The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Crocs, Inc. (NASDAQ:CROX) based on those filings.
Crocs, Inc. (NASDAQ:CROX) has experienced a decrease in hedge fund interest of late. Our calculations also showed that CROX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Gabriel Plotkin of Melvin Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the new hedge fund action encompassing Crocs, Inc. (NASDAQ:CROX).
How have hedgies been trading Crocs, Inc. (NASDAQ:CROX)?
Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CROX over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Crocs, Inc. (NASDAQ:CROX), with a stake worth $81.7 million reported as of the end of September. Trailing Renaissance Technologies was Woodson Capital Management, which amassed a stake valued at $40.8 million. Marshall Wace LLP, Melvin Capital Management, and Polaris Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Crocs, Inc. (NASDAQ:CROX), around 5.79% of its 13F portfolio. No Street Capital is also relatively very bullish on the stock, earmarking 2.23 percent of its 13F equity portfolio to CROX.
Due to the fact that Crocs, Inc. (NASDAQ:CROX) has witnessed falling interest from hedge fund managers, it’s easy to see that there is a sect of hedge funds that decided to sell off their entire stakes heading into Q4. Intriguingly, George McCabe’s Portolan Capital Management dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $37 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund said goodbye to about $10.6 million worth. These moves are important to note, as aggregate hedge fund interest fell by 11 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to Crocs, Inc. (NASDAQ:CROX). These stocks are Great Western Bancorp Inc (NYSE:GWB), FBL Financial Group, Inc. (NYSE:FFG), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), and WW International, Inc. (NASDAQ:WW). All of these stocks’ market caps are closest to CROX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GWB | 10 | 12427 | -7 |
| FFG | 8 | 15395 | 1 |
| ARI | 17 | 41289 | 1 |
| WW | 22 | 175765 | -15 |
| Average | 14.25 | 61219 | -5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $303 million in CROX’s case. WW International, Inc. (NASDAQ:WW) is the most popular stock in this table. On the other hand FBL Financial Group, Inc. (NYSE:FFG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Crocs, Inc. (NASDAQ:CROX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on CROX as the stock returned 92.6% so far in Q2 (through June 10th) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
