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Did Hedge Funds Make The Right Call On Skyline Champion Corporation (SKY) ?

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 Skyline Champion Corporation (NYSE:SKY) based on that data and determine whether they were really smart about the stock.

Skyline Champion Corporation (NYSE:SKY) was in 23 hedge funds’ portfolios at the end of March. SKY has experienced a decrease in hedge fund sentiment lately. There were 26 hedge funds in our database with SKY positions at the end of the previous quarter. Our calculations also showed that SKY 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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 Driehaus of Driehaus Capital

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. Keeping this in mind let’s take a look at the latest hedge fund action regarding Skyline Champion Corporation (NYSE:SKY).

How are hedge funds trading Skyline Champion Corporation (NYSE:SKY)?

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SKY over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, MAK Capital One was the largest shareholder of Skyline Champion Corporation (NYSE:SKY), with a stake worth $52.8 million reported as of the end of September. Trailing MAK Capital One was Adage Capital Management, which amassed a stake valued at $28.5 million. Driehaus Capital, Newtyn Management, and 12th Street Asset 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 MAK Capital One allocated the biggest weight to Skyline Champion Corporation (NYSE:SKY), around 46.6% of its 13F portfolio. Venator Capital Management is also relatively very bullish on the stock, earmarking 4.12 percent of its 13F equity portfolio to SKY.

Due to the fact that Skyline Champion Corporation (NYSE:SKY) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers that elected to cut their entire stakes in the first quarter. Intriguingly, Mark Coe’s Intrinsic Edge Capital said goodbye to the biggest stake of the 750 funds watched by Insider Monkey, comprising about $13.5 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund dropped about $3.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds in the first quarter.

Let’s now review hedge fund activity in other stocks similar to Skyline Champion Corporation (NYSE:SKY). These stocks are Sturm, Ruger & Company, Inc. (NYSE:RGR), Service Properties Trust (NASDAQ:SVC), Odonate Therapeutics, Inc. (NASDAQ:ODT), and Immunovant, Inc. (NASDAQ:IMVT). All of these stocks’ market caps are closest to SKY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RGR 14 102980 2
SVC 23 30778 6
ODT 13 471188 -2
IMVT 28 146496 6
Average 19.5 187861 3

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $143 million in SKY’s case. Immunovant, Inc. (NASDAQ:IMVT) is the most popular stock in this table. On the other hand Odonate Therapeutics, Inc. (NASDAQ:ODT) is the least popular one with only 13 bullish hedge fund positions. Skyline Champion Corporation (NYSE:SKY) 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 SKY as the stock returned 55.2% 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.