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Did Hedge Funds Drop The Ball On G-III Apparel Group, Ltd. (GIII)?

Is G-III Apparel Group, Ltd. (NASDAQ:GIII) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

G-III Apparel Group, Ltd. (NASDAQ:GIII) has seen a decrease in enthusiasm from smart money lately. GIII was in 13 hedge funds’ portfolios at the end of December. There were 17 hedge funds in our database with GIII holdings at the end of the previous quarter. Our calculations also showed that GIII isn’t among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Keidan of Buckingham Capital

We’re going to take a glance at the new hedge fund action surrounding G-III Apparel Group, Ltd. (NASDAQ:GIII).

What have hedge funds been doing with G-III Apparel Group, Ltd. (NASDAQ:GIII)?

At Q4’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in GIII over the last 14 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

GIII_apr2019

More specifically, Columbus Circle Investors was the largest shareholder of G-III Apparel Group, Ltd. (NASDAQ:GIII), with a stake worth $37 million reported as of the end of December. Trailing Columbus Circle Investors was Buckingham Capital Management, which amassed a stake valued at $18.8 million. Water Street Capital, Renaissance Technologies, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that G-III Apparel Group, Ltd. (NASDAQ:GIII) has faced bearish sentiment from the smart money, logic holds that there was a specific group of hedge funds that elected to cut their entire stakes in the third quarter. It’s worth mentioning that Richard Driehaus’s Driehaus Capital dropped the biggest position of the “upper crust” of funds monitored by Insider Monkey, worth close to $16.7 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $10.6 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as G-III Apparel Group, Ltd. (NASDAQ:GIII) but similarly valued. We will take a look at Enanta Pharmaceuticals Inc (NASDAQ:ENTA), Atrion Corporation (NASDAQ:ATRI), Osisko Gold Royalties Ltd (NYSE:OR), and Vector Group Ltd (NYSE:VGR). All of these stocks’ market caps match GIII’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ENTA 20 204695 -1
ATRI 10 81331 -1
OR 11 22535 1
VGR 20 158726 2
Average 15.25 116822 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $103 million in GIII’s case. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is the most popular stock in this table. On the other hand Atrion Corporation (NASDAQ:ATRI) is the least popular one with only 10 bullish hedge fund positions. G-III Apparel Group, Ltd. (NASDAQ:GIII) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on GIII as the stock returned 51.4% and outperformed the market by an even larger margin.

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

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