Did Hedge Funds Make The Right Call On Skechers USA Inc (SKX) ?

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 Skechers USA Inc (NYSE:SKX) based on that data and determine whether they were really smart about the stock.

Skechers USA Inc (NYSE:SKX) has seen a decrease in hedge fund sentiment of late. Our calculations also showed that SKX 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 today’s marketplace there are a multitude of formulas stock traders use to evaluate stocks. A pair of the most useful formulas are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite fund managers can outperform the broader indices by a significant margin (see the details here).

Jeffrey Bronchick - Cove Street Capital

Jeffrey Bronchick of Cove Street Capital

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 look at the key hedge fund action regarding Skechers USA Inc (NYSE:SKX).

What does smart money think about Skechers USA Inc (NYSE:SKX)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the fourth quarter of 2019. On the other hand, there were a total of 24 hedge funds with a bullish position in SKX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

The largest stake in Skechers USA Inc (NYSE:SKX) was held by Tremblant Capital, which reported holding $95.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $77.9 million position. Other investors bullish on the company included Marshall Wace LLP, Samlyn Capital, and Southpoint Capital Advisors. In terms of the portfolio weights assigned to each position Tremblant Capital allocated the biggest weight to Skechers USA Inc (NYSE:SKX), around 6.01% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, earmarking 4.88 percent of its 13F equity portfolio to SKX.

Since Skechers USA Inc (NYSE:SKX) has experienced falling interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds that decided to sell off their full holdings heading into Q4. Intriguingly, Kamyar Khajavi’s MIK Capital dumped the biggest position of all the hedgies monitored by Insider Monkey, totaling an estimated $11.5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $8.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 4 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Skechers USA Inc (NYSE:SKX). These stocks are SYNNEX Corporation (NYSE:SNX), MAXIMUS, Inc. (NYSE:MMS), PS Business Parks Inc (NYSE:PSB), and HUYA Inc. (NYSE:HUYA). All of these stocks’ market caps are closest to SKX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNX 24 263748 2
MMS 26 132535 2
PSB 17 83370 2
HUYA 18 265315 -3
Average 21.25 186242 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $186 million. That figure was $486 million in SKX’s case. MAXIMUS, Inc. (NYSE:MMS) is the most popular stock in this table. On the other hand PS Business Parks Inc (NYSE:PSB) is the least popular one with only 17 bullish hedge fund positions. Skechers USA Inc (NYSE:SKX) 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 SKX as the stock returned 32.2% 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.