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Do Hedge Funds Love Steven Madden, Ltd. (SHOO)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Steven Madden, Ltd. (NASDAQ:SHOO) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Steven Madden, Ltd. (NASDAQ:SHOO) investors should be aware of an increase in support from the world’s most elite money managers lately. Steven Madden, Ltd. (NASDAQ:SHOO) was in 20 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. Our calculations also showed that SHOO isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 56 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.

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox.Keeping this in mind let’s take a gander at the new hedge fund action regarding Steven Madden, Ltd. (NASDAQ:SHOO).

How have hedgies been trading Steven Madden, Ltd. (NASDAQ:SHOO)?

At second quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SHOO over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the most valuable position in Steven Madden, Ltd. (NASDAQ:SHOO), worth close to $20.9 million, corresponding to less than 0.1%% of its total 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $10.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism encompass D. E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Steven Madden, Ltd. (NASDAQ:SHOO), around 0.96% of its 13F portfolio. Gotham Asset Management is also relatively very bullish on the stock, designating 0.09 percent of its 13F equity portfolio to SHOO.

Consequently, some big names were breaking ground themselves. PDT Partners, managed by Peter Muller, assembled the most valuable position in Steven Madden, Ltd. (NASDAQ:SHOO). PDT Partners had $0.7 million invested in the company at the end of the quarter. Bruce Kovner’s Caxton Associates LP also made a $0.5 million investment in the stock during the quarter. The other funds with brand new SHOO positions are Michael Gelband’s ExodusPoint Capital, Donald Sussman’s Paloma Partners, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Steven Madden, Ltd. (NASDAQ:SHOO) but similarly valued. These stocks are Installed Building Products Inc (NYSE:IBP), Synaptics Incorporated (NASDAQ:SYNA), Pacific Premier Bancorp, Inc. (NASDAQ:PPBI), Outfront Media Inc (REIT) (NYSE:OUT), Tower Semiconductor Ltd. (NASDAQ:TSEM), Worthington Industries, Inc. (NYSE:WOR), and CIT Group Inc. (NYSE:CIT). This group of stocks’ market caps resemble SHOO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IBP 21 117545 0
SYNA 28 319903 2
PPBI 11 75350 3
OUT 38 470016 8
TSEM 15 312269 4
WOR 21 77248 7
CIT 27 320526 -10
Average 23 241837 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $65 million in SHOO’s case. Outfront Media Inc (REIT) (NYSE:OUT) is the most popular stock in this table. On the other hand Pacific Premier Bancorp, Inc. (NASDAQ:PPBI) is the least popular one with only 11 bullish hedge fund positions. Steven Madden, Ltd. (NASDAQ:SHOO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SHOO is 34.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately SHOO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); SHOO investors were disappointed as the stock returned -21% in the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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