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Did Hedge Funds Make The Right Call On Crocs, Inc. (CROX) ?

The latest 13F reporting period has come and gone, and 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. Now, 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 you are going to find out whether hedge funds thought Crocs, Inc. (NASDAQ:CROX) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Crocs, Inc. (NASDAQ:CROX) has experienced a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that CROX 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In the eyes of most market participants, hedge funds are perceived as worthless, outdated financial tools of yesteryear. While there are greater than 8000 funds trading at present, Our experts choose to focus on the moguls of this club, about 850 funds. These hedge fund managers have their hands on bulk of the hedge fund industry’s total capital, and by monitoring their unrivaled picks, Insider Monkey has discovered various investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Gabriel Plotkin Melvin Capital Management

Gabriel Plotkin of Melvin Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. 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 if you have any good ideas send us an email. With all of this in mind let’s view the new hedge fund action encompassing Crocs, Inc. (NASDAQ:CROX).

How have hedgies been trading Crocs, Inc. (NASDAQ:CROX)?

At the end of the first quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in CROX a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of Crocs, Inc. (NASDAQ:CROX), with a stake worth $81.7 million reported as of the end of September. Trailing Renaissance Technologies was Woodson Capital Management, which amassed a stake valued at $40.8 million. Marshall Wace LLP, Melvin Capital Management, and Polaris Capital Management 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 Woodson Capital Management allocated the biggest weight to Crocs, Inc. (NASDAQ:CROX), around 5.79% of its 13F portfolio. No Street Capital is also relatively very bullish on the stock, designating 2.23 percent of its 13F equity portfolio to CROX.

Since Crocs, Inc. (NASDAQ:CROX) has experienced a decline in interest from the smart money, logic holds that there lies a certain “tier” of fund managers that decided to sell off their full holdings in the first quarter. At the top of the heap, George McCabe’s Portolan Capital Management said goodbye to the largest stake of all the hedgies watched by Insider Monkey, worth about $37 million in stock, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors was right behind this move, as the fund dropped about $10.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 11 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Crocs, Inc. (NASDAQ:CROX). These stocks are Great Western Bancorp Inc (NYSE:GWB), FBL Financial Group, Inc. (NYSE:FFG), Apollo Commercial Real Est. Finance Inc (NYSE:ARI), and WW International, Inc. (NASDAQ:WW). All of these stocks’ market caps are closest to CROX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GWB 10 12427 -7
FFG 8 15395 1
ARI 17 41289 1
WW 22 175765 -15
Average 14.25 61219 -5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $61 million. That figure was $303 million in CROX’s case. WW International, Inc. (NASDAQ:WW) is the most popular stock in this table. On the other hand FBL Financial Group, Inc. (NYSE:FFG) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Crocs, Inc. (NASDAQ:CROX) 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 CROX as the stock returned 116.7% 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.

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