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Did Hedge Funds Drop The Ball On Abercrombie & Fitch Co. (ANF) ?

We can judge whether Abercrombie & Fitch Co. (NYSE:ANF) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.

Is Abercrombie & Fitch Co. (NYSE:ANF) worth your attention right now? Hedge funds are taking an optimistic view. The number of long hedge fund bets moved up by 2 recently. Our calculations also showed that ANF isn’t among the 30 most popular stocks among hedge funds. ANF was in 22 hedge funds’ portfolios at the end of December. There were 20 hedge funds in our database with ANF holdings at the end of the previous quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

Ken Griffin

Let’s analyze the recent hedge fund action encompassing Abercrombie & Fitch Co. (NYSE:ANF).

What does the smart money think about Abercrombie & Fitch Co. (NYSE:ANF)?

At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ANF over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ANF_apr2019

When looking at the institutional investors followed by Insider Monkey, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital has the biggest position in Abercrombie & Fitch Co. (NYSE:ANF), worth close to $32.2 million, accounting for 0.1% of its total 13F portfolio. On Arrowstreet Capital’s heels is Robert Bishop of Impala Asset Management, with a $19.9 million position; the fund has 1.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism contain Anand Parekh’s Alyeska Investment Group, Noam Gottesman’s GLG Partners and Ken Griffin’s Citadel Investment Group.

Consequently, key hedge funds were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, assembled the most valuable position in Abercrombie & Fitch Co. (NYSE:ANF). Alyeska Investment Group had $17.7 million invested in the company at the end of the quarter. Claes Fornell’s CSat Investment Advisory also initiated a $0.2 million position during the quarter. The only other fund with a brand new ANF position is Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s now take a look at hedge fund activity in other stocks similar to Abercrombie & Fitch Co. (NYSE:ANF). These stocks are TTEC Holdings, Inc. (NASDAQ:TTEC), GreenTree Hospitality Group Ltd. (NYSE:GHG), Plantronics, Inc. (NYSE:PLT), and Autolus Therapeutics plc (NASDAQ:AUTL). This group of stocks’ market valuations are similar to ANF’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TTEC 15 19967 1
GHG 7 17999 -4
PLT 16 72043 -9
AUTL 6 408867 -5
Average 11 129719 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $130 million. That figure was $128 million in ANF’s case. Plantronics, Inc. (NYSE:PLT) is the most popular stock in this table. On the other hand Autolus Therapeutics plc (NASDAQ:AUTL) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Abercrombie & Fitch Co. (NYSE:ANF) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on ANF as the stock returned 38.1% 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.

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

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