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Do Hedge Funds Love Boot Barn Holdings Inc (BOOT)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Boot Barn Holdings Inc (NYSE:BOOT).

Is Boot Barn Holdings Inc (NYSE:BOOT) a bargain? The smart money is in a pessimistic mood. The number of long hedge fund bets were cut by 8 in recent months. Our calculations also showed that BOOT 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). BOOT was in 20 hedge funds’ portfolios at the end of the first quarter of 2020. There were 28 hedge funds in our database with BOOT positions at the end of the previous quarter.

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

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Colin Moran Abdiel Capital

Colin Moran of Abdiel Capital Advisors

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a glance at the recent hedge fund action surrounding Boot Barn Holdings Inc (NYSE:BOOT).

What does smart money think about Boot Barn Holdings Inc (NYSE:BOOT)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -29% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards BOOT over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BOOT A Good Stock To Buy?

More specifically, Half Sky Capital was the largest shareholder of Boot Barn Holdings Inc (NYSE:BOOT), with a stake worth $13.2 million reported as of the end of September. Trailing Half Sky Capital was PDT Partners, which amassed a stake valued at $3.1 million. Stony Point Capital, Shellback Capital, and Broad Bay Capital 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 Half Sky Capital allocated the biggest weight to Boot Barn Holdings Inc (NYSE:BOOT), around 5.19% of its 13F portfolio. Berylson Capital Partners is also relatively very bullish on the stock, earmarking 5.19 percent of its 13F equity portfolio to BOOT.

Due to the fact that Boot Barn Holdings Inc (NYSE:BOOT) has witnessed falling interest from hedge fund managers, logic holds that there was a specific group of funds who sold off their positions entirely by the end of the first quarter. Interestingly, Richard Driehaus’s Driehaus Capital dropped the largest stake of all the hedgies followed by Insider Monkey, comprising an estimated $31.4 million in stock, and Mark Coe’s Intrinsic Edge Capital was right behind this move, as the fund said goodbye to about $13.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 8 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Boot Barn Holdings Inc (NYSE:BOOT) but similarly valued. We will take a look at IES Holdings, Inc. (NASDAQ:IESC), Impinj, Inc. (NASDAQ:PI), Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA), and Fortuna Silver Mines Inc. (NYSE:FSM). This group of stocks’ market valuations resemble BOOT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IESC 10 237335 -1
PI 18 137212 -2
STSA 5 157511 0
FSM 8 33856 -1
Average 10.25 141479 -1

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $141 million. That figure was $32 million in BOOT’s case. Impinj, Inc. (NASDAQ:PI) is the most popular stock in this table. On the other hand Satsuma Pharmaceuticals, Inc. (NASDAQ:STSA) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Boot Barn Holdings Inc (NYSE:BOOT) is more popular among hedge funds. 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 returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on BOOT as the stock returned 77% so far in Q2 (through June 17th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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