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Did Hedge Funds Make The Right Call On Gildan Activewear Inc (GIL) ?

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 Gildan Activewear Inc (NYSE:GIL) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Gildan Activewear Inc (NYSE:GIL) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of March. At the end of this article we will also compare GIL to other stocks including Brighthouse Financial, Inc. (NASDAQ:BHF), Qurate Retail, Inc. (NASDAQ:QRTEA), and Lexington Realty Trust (NYSE:LXP) to get a better sense of its popularity.

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

In the eyes of most market participants, hedge funds are seen as unimportant, old investment vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our experts look at the moguls of this club, around 850 funds. Most estimates calculate that this group of people oversee bulk of the hedge fund industry’s total asset base, and by observing their highest performing stock picks, Insider Monkey has unearthed a number of investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy beat 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 .

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, on one site we found out that NBA champion Isiah Thomas is now the CEO of this cannabis company. The same site also talks about a snack manufacturer that’s growing at 30% annually. 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 take a look at the key hedge fund action surrounding Gildan Activewear Inc (NYSE:GIL).

Hedge fund activity in Gildan Activewear Inc (NYSE:GIL)

At the end of the first quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards GIL over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in Gildan Activewear Inc (NYSE:GIL), which was worth $175.4 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $24.6 million worth of shares. Arrowstreet Capital, D E Shaw, and Citadel Investment Group 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 Gratia Capital allocated the biggest weight to Gildan Activewear Inc (NYSE:GIL), around 14.45% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, setting aside 2.9 percent of its 13F equity portfolio to GIL.

Judging by the fact that Gildan Activewear Inc (NYSE:GIL) has faced bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of money managers who were dropping their entire stakes in the first quarter. Intriguingly, Angela Aldrich’s Bayberry Capital Partners dropped the largest position of the “upper crust” of funds tracked by Insider Monkey, valued at close to $18 million in stock, and Martin D. Sass’s MD Sass was right behind this move, as the fund said goodbye to about $15.7 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Gildan Activewear Inc (NYSE:GIL). We will take a look at Brighthouse Financial, Inc. (NASDAQ:BHF), Qurate Retail, Inc. (NASDAQ:QRTEA), Lexington Realty Trust (NYSE:LXP), and Air Lease Corp (NYSE:AL). This group of stocks’ market values resemble GIL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BHF 25 372976 -18
QRTEA 32 477820 -7
LXP 10 41143 -4
AL 20 378732 -3
Average 21.75 317668 -8

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $318 million. That figure was $275 million in GIL’s case. Qurate Retail, Inc. (NASDAQ:QRTEA) is the most popular stock in this table. On the other hand Lexington Realty Trust (NYSE:LXP) is the least popular one with only 10 bullish hedge fund positions. Gildan Activewear Inc (NYSE:GIL) 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 GIL, though not to the same extent, as the stock returned 21.4% during the second quarter and outperformed the market as well.

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