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Did Hedge Funds Make The Right Call On PVH Corp (PVH)?

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 thoughtPVH Corp (NYSE:PVH) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is PVH Corp (NYSE:PVH) going to take off soon? The best stock pickers were in a bearish mood. The number of long hedge fund bets were cut by 11 recently. Our calculations also showed that PVH 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). PVH was in 18 hedge funds’ portfolios at the end of March. There were 29 hedge funds in our database with PVH holdings at the end of the previous quarter.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

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. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind we’re going to review the recent hedge fund action regarding PVH Corp (NYSE:PVH).

How have hedgies been trading PVH Corp (NYSE:PVH)?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PVH over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in PVH Corp (NYSE:PVH) was held by Pzena Investment Management, which reported holding $239.6 million worth of stock at the end of September. It was followed by D E Shaw with a $28.3 million position. Other investors bullish on the company included AQR Capital Management, Arrowstreet Capital, and Gotham Asset Management. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to PVH Corp (NYSE:PVH), around 1.81% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.42 percent of its 13F equity portfolio to PVH.

Judging by the fact that PVH Corp (NYSE:PVH) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there were a few money managers that decided to sell off their positions entirely by the end of the first quarter. It’s worth mentioning that Anand Parekh’s Alyeska Investment Group dumped the biggest investment of all the hedgies followed by Insider Monkey, worth about $61.5 million in stock, and Ryan Frick and Oliver Evans’s Dorsal Capital Management was right behind this move, as the fund dumped about $47.3 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 11 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to PVH Corp (NYSE:PVH). These stocks are Cannae Holdings, Inc. (NYSE:CNNE), Devon Energy Corporation (NYSE:DVN), Nexstar Media Group, Inc. (NASDAQ:NXST), and Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI). All of these stocks’ market caps are closest to PVH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNNE 20 240727 -11
DVN 42 222790 -12
NXST 41 662726 1
SHI 3 11620 0
Average 26.5 284466 -5.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $347 million in PVH’s case. Devon Energy Corporation (NYSE:DVN) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI) is the least popular one with only 3 bullish hedge fund positions. PVH Corp (NYSE:PVH) is not the least popular stock in this group but hedge fund interest is still below 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 18.6% in 2020 through July 27th and still beat the market by 17.1 percentage points. A small number of hedge funds were also right about betting on PVH as the stock returned 33.2% since the end of March and outperformed the market by an even larger margin.

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