Did Hedge Funds Catch A Break With Skechers USA Inc (SKX)?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Skechers USA Inc (NYSE:SKX) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Skechers USA Inc (NYSE:SKX) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 35 hedge funds’ portfolios at the end of September. Our calculations also showed that SKX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare SKX to other stocks including Planet Fitness Inc (NYSE:PLNT), Change Healthcare Inc. (NASDAQ:CHNG), and Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR) to get a better sense of its popularity.

Jim Simons of Renaissance Technologies

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to check out the key hedge fund action surrounding Skechers USA Inc (NYSE:SKX).

Do Hedge Funds Think SKX Is A Good Stock To Buy Now?

At third quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SKX over the last 25 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is SKX A Good Stock To Buy?

The largest stake in Skechers USA Inc (NYSE:SKX) was held by Pzena Investment Management, which reported holding $196 million worth of stock at the end of September. It was followed by Tremblant Capital with a $115 million position. Other investors bullish on the company included Marshall Wace LLP, Arrowstreet Capital, and Tremblant Capital. In terms of the portfolio weights assigned to each position Venator Capital Management allocated the biggest weight to Skechers USA Inc (NYSE:SKX), around 4.65% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, dishing out 4.13 percent of its 13F equity portfolio to SKX.

Judging by the fact that Skechers USA Inc (NYSE:SKX) has experienced declining sentiment from the smart money, we can see that there was a specific group of funds that elected to cut their full holdings last quarter. Interestingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest stake of all the hedgies tracked by Insider Monkey, valued at about $24.9 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dumped about $16.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Skechers USA Inc (NYSE:SKX) but similarly valued. We will take a look at Planet Fitness Inc (NYSE:PLNT), Change Healthcare Inc. (NASDAQ:CHNG), Arrowhead Pharmaceuticals Inc. (NASDAQ:ARWR), Virgin Galactic Holdings, Inc. (NYSE:SPCE), Varonis Systems Inc (NASDAQ:VRNS), First Financial Bankshares Inc (NASDAQ:FFIN), and Healthcare Trust Of America Inc (NYSE:HTA). All of these stocks’ market caps resemble SKX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLNT 40 1515923 6
CHNG 50 1557603 -1
ARWR 24 150783 -6
SPCE 16 105669 -2
VRNS 27 298396 3
FFIN 20 81284 12
HTA 14 381781 -9
Average 27.3 584491 0.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $584 million. That figure was $744 million in SKX’s case. Change Healthcare Inc. (NASDAQ:CHNG) is the most popular stock in this table. On the other hand Healthcare Trust Of America Inc (NYSE:HTA) is the least popular one with only 14 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. Our overall hedge fund sentiment score for SKX is 63.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on SKX as the stock returned -0.3% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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Disclosure: None. This article was originally published at Insider Monkey.