Did Hedge Funds Make The Right Call On Capri Holdings Limited (CPRI) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Capri Holdings Limited (NYSE:CPRI) based on that data and determine whether they were really smart about the stock.

Is Capri Holdings Limited (NYSE:CPRI) a bargain? Hedge funds were in a bearish mood. The number of long hedge fund positions retreated by 11 recently. Our calculations also showed that CPRI 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.

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 monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to check out the fresh hedge fund action surrounding Capri Holdings Limited (NYSE:CPRI).

How have hedgies been trading Capri Holdings Limited (NYSE:CPRI)?

Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -28% from the fourth quarter of 2019. By comparison, 37 hedge funds held shares or bullish call options in CPRI 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.

Among these funds, Eminence Capital held the most valuable stake in Capri Holdings Limited (NYSE:CPRI), which was worth $149 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $41.4 million worth of shares. Masters Capital Management, Rima Senvest Management, and Antipodes 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 Proxima Capital Management allocated the biggest weight to Capri Holdings Limited (NYSE:CPRI), around 9.17% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, dishing out 2.18 percent of its 13F equity portfolio to CPRI.

Since Capri Holdings Limited (NYSE:CPRI) has experienced a decline in interest from the smart money, we can see that there exists a select few hedgies who sold off their positions entirely in the first quarter. Interestingly, Alexander Roepers’s Atlantic Investment Management dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, comprising an estimated $51.1 million in stock. Alok Agrawal’s fund, Bloom Tree Partners, also sold off its stock, about $24 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 11 funds in the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Capri Holdings Limited (NYSE:CPRI) but similarly valued. These stocks are Boyd Gaming Corporation (NYSE:BYD), Fox Factory Holding Corp (NASDAQ:FOXF), Bottomline Technologies (NASDAQ:EPAY), and Goosehead Insurance, Inc. (NASDAQ:GSHD). This group of stocks’ market values are closest to CPRI’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $280 million in CPRI’s case. Boyd Gaming Corporation (NYSE:BYD) is the most popular stock in this table. On the other hand Fox Factory Holding Corp (NASDAQ:FOXF) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Capri Holdings Limited (NYSE:CPRI) 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 returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on CPRI as the stock returned 44.9% in Q2 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.