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Did Hedge Funds Drop The Ball On Boot Barn Holdings Inc (BOOT) ?

How do we determine whether Boot Barn Holdings Inc (NYSE:BOOT) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Boot Barn Holdings Inc (NYSE:BOOT) shareholders have witnessed a decrease in hedge fund sentiment of late. Our calculations also showed that boot isn’t among the 30 most popular stocks among hedge funds.

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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

SAC CAPITAL ADVISORS

We’re going to go over the recent hedge fund action encompassing Boot Barn Holdings Inc (NYSE:BOOT).

What does the smart money think about Boot Barn Holdings Inc (NYSE:BOOT)?

Heading into the first quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. On the other hand, there were a total of 22 hedge funds with a bullish position in BOOT a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with BOOT Positions

More specifically, Marshall Wace LLP was the largest shareholder of Boot Barn Holdings Inc (NYSE:BOOT), with a stake worth $15.3 million reported as of the end of December. Trailing Marshall Wace LLP was Millennium Management, which amassed a stake valued at $14.6 million. Scopus Asset Management, Point72 Asset Management, and Shellback Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Because Boot Barn Holdings Inc (NYSE:BOOT) has faced a decline in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their full holdings heading into Q3. Interestingly, Jim Simons’s Renaissance Technologies said goodbye to the largest investment of the 700 funds followed by Insider Monkey, comprising about $6.5 million in stock, and D. E. Shaw’s D E Shaw was right behind this move, as the fund dropped about $3.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Boot Barn Holdings Inc (NYSE:BOOT) but similarly valued. These stocks are Petmed Express Inc (NASDAQ:PETS), Innophos Holdings, Inc. (NASDAQ:IPHS), Comstock Resources Inc (NYSE:CRK), and Arcus Biosciences, Inc. (NYSE:RCUS). This group of stocks’ market valuations match BOOT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PETS 15 90720 -3
IPHS 13 35241 3
CRK 8 4129 3
RCUS 9 70467 0
Average 11.25 50139 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $78 million in BOOT’s case. Petmed Express Inc (NASDAQ:PETS) is the most popular stock in this table. On the other hand Comstock Resources Inc (NYSE:CRK) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Boot Barn Holdings Inc (NYSE:BOOT) 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 BOOT as the stock returned 69.5% 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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