In this article we will check out the progression of hedge fund sentiment towards Skechers USA Inc (NYSE:SKX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Skechers USA Inc (NYSE:SKX) investors should be aware of a decrease in hedge fund interest of late. SKX was in 26 hedge funds’ portfolios at the end of March. There were 30 hedge funds in our database with SKX positions at the end of the previous quarter. 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 the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Keeping this in mind let’s take a look at the new hedge fund action encompassing Skechers USA Inc (NYSE:SKX).
How are hedge funds trading 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 previous quarter. By comparison, 24 hedge funds held shares or bullish call options in SKX a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Tremblant Capital, managed by Brett Barakett, holds the largest position in Skechers USA Inc (NYSE:SKX). Tremblant Capital has a $95.5 million position in the stock, comprising 6% of its 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which holds a $77.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions encompass Paul Marshall and Ian Wace’s Marshall Wace LLP, Robert Pohly’s Samlyn Capital and John Smith Clark’s 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, designating 4.88 percent of its 13F equity portfolio to SKX.
Since Skechers USA Inc (NYSE:SKX) has faced declining sentiment from the smart money, it’s safe to say that there exists a select few hedgies that slashed their full holdings heading into Q4. Intriguingly, Kamyar Khajavi’s MIK Capital dropped the biggest stake of the 750 funds monitored by Insider Monkey, worth close to $11.5 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $8.2 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Skechers USA Inc (NYSE:SKX). We will take a look at 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|
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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on SKX as the stock returned 31.9% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.