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Did Hedge Funds Make The Right Call On Canada Goose Holdings Inc. (GOOS) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Canada Goose Holdings Inc. (NYSE:GOOS) and determine whether the smart money was really smart about this stock.

Is Canada Goose Holdings Inc. (NYSE:GOOS) a buy here? Prominent investors were getting more bullish. The number of bullish hedge fund bets improved by 6 lately. Our calculations also showed that GOOS 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.

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 S&P 500 ETFs by 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.

Andreas Halvorsen

Andreas Halvorsen of Viking Global

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind let’s take a look at the latest hedge fund action surrounding Canada Goose Holdings Inc. (NYSE:GOOS).

What have hedge funds been doing with Canada Goose Holdings Inc. (NYSE:GOOS)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards GOOS over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

More specifically, Select Equity Group was the largest shareholder of Canada Goose Holdings Inc. (NYSE:GOOS), with a stake worth $72.8 million reported as of the end of September. Trailing Select Equity Group was Tiger Pacific Capital, which amassed a stake valued at $32.1 million. Viking Global, Citadel Investment Group, and Miller Value Partners 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 Tiger Pacific Capital allocated the biggest weight to Canada Goose Holdings Inc. (NYSE:GOOS), around 10.08% of its 13F portfolio. Ancient Art (Teton Capital) is also relatively very bullish on the stock, dishing out 1.78 percent of its 13F equity portfolio to GOOS.

As aggregate interest increased, key hedge funds were breaking ground themselves. Tiger Pacific Capital, managed by Run Ye, Junji Takegami and Hoyon Hwang, initiated the most valuable position in Canada Goose Holdings Inc. (NYSE:GOOS). Tiger Pacific Capital had $32.1 million invested in the company at the end of the quarter. Bill Miller’s Miller Value Partners also initiated a $18 million position during the quarter. The following funds were also among the new GOOS investors: Quincy Lee’s Ancient Art (Teton Capital), Kerr Neilson’s Platinum Asset Management, and Daniel S. Och’s OZ Management.

Let’s check out hedge fund activity in other stocks similar to Canada Goose Holdings Inc. (NYSE:GOOS). These stocks are Banner Corporation (NASDAQ:BANR), Harmony Gold Mining Company Limited (NYSE:HMY), National Research Corporation (NASDAQ:NRC), and Uniti Group Inc. (NASDAQ:UNIT). This group of stocks’ market values resemble GOOS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BANR 15 54121 3
HMY 9 39467 -3
NRC 8 41203 -1
UNIT 13 73283 -2
Average 11.25 52019 -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 $52 million. That figure was $221 million in GOOS’s case. Banner Corporation (NASDAQ:BANR) is the most popular stock in this table. On the other hand National Research Corporation (NASDAQ:NRC) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Canada Goose Holdings Inc. (NYSE:GOOS) 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 gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately GOOS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on GOOS were disappointed as the stock returned 16.5% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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