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Did Hedge Funds Make The Right Call On Deckers Outdoor Corp (DECK)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Deckers Outdoor Corp (NASDAQ:DECK) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is Deckers Outdoor Corp (NASDAQ:DECK) the right investment to pursue these days? Money managers were reducing their bets on the stock. The number of bullish hedge fund bets went down by 12 lately. Our calculations also showed that DECK 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). DECK was in 31 hedge funds’ portfolios at the end of March. There were 43 hedge funds in our database with DECK holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most market participants, hedge funds are perceived as unimportant, old financial vehicles of years past. While there are greater than 8000 funds in operation at the moment, Our experts choose to focus on the leaders of this club, approximately 850 funds. Most estimates calculate that this group of people control bulk of all hedge funds’ total asset base, and by paying attention to their unrivaled stock picks, Insider Monkey has identified numerous investment strategies that have historically outrun Mr. Market. 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

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. Now we’re going to take a gander at the new hedge fund action regarding Deckers Outdoor Corp (NASDAQ:DECK).

How are hedge funds trading Deckers Outdoor Corp (NASDAQ:DECK)?

Heading into the second quarter of 2020, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -28% from the fourth quarter of 2019. By comparison, 29 hedge funds held shares or bullish call options in DECK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is DECK A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Samlyn Capital, managed by Robert Pohly, holds the largest position in Deckers Outdoor Corp (NASDAQ:DECK). Samlyn Capital has a $90.5 million position in the stock, comprising 2.3% of its 13F portfolio. On Samlyn Capital’s heels is Gabriel Plotkin of Melvin Capital Management, with a $90.5 million position; 0.7% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors that hold long positions comprise Cliff Asness’s AQR Capital Management, James Woodson Davis’s Woodson Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Woodson Capital Management allocated the biggest weight to Deckers Outdoor Corp (NASDAQ:DECK), around 7.61% of its 13F portfolio. Miura Global Management is also relatively very bullish on the stock, setting aside 7.46 percent of its 13F equity portfolio to DECK.

Because Deckers Outdoor Corp (NASDAQ:DECK) has faced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of funds that elected to cut their entire stakes in the first quarter. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the largest investment of the “upper crust” of funds monitored by Insider Monkey, valued at close to $28.4 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund said goodbye to about $12.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 12 funds in the first quarter.

Let’s go over hedge fund activity in other stocks similar to Deckers Outdoor Corp (NASDAQ:DECK). We will take a look at Vir Biotechnology, Inc. (NASDAQ:VIR), Jabil Inc. (NYSE:JBL), Ritchie Bros. Auctioneers (NYSE:RBA), and GrubHub Inc (NYSE:GRUB). This group of stocks’ market values are similar to DECK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VIR 4 17427 2
JBL 20 252649 -14
RBA 14 178380 -7
GRUB 32 373032 -1
Average 17.5 205372 -5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.5 hedge funds with bullish positions and the average amount invested in these stocks was $205 million. That figure was $554 million in DECK’s case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand Vir Biotechnology, Inc. (NASDAQ:VIR) is the least popular one with only 4 bullish hedge fund positions. Deckers Outdoor Corp (NASDAQ:DECK) is not the most popular stock in this group but hedge fund interest is still above average. 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 but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on DECK as the stock returned 46.6% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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