The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Skyline Champion Corporation (NYSE:SKY) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.
Hedge fund interest in Skyline Champion Corporation (NYSE:SKY) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SKY 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Methanex Corporation (NASDAQ:MEOH), GreenTree Hospitality Group Ltd. (NYSE:GHG), and James River Group Holdings Ltd (NASDAQ:JRVR) to gather more data points. Our calculations also showed that SKY 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.
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 56 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.
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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. 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 latest hedge fund action surrounding Skyline Champion Corporation (NYSE:SKY).
How are hedge funds trading Skyline Champion Corporation (NYSE:SKY)?
At the end of June, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in SKY a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, MAK Capital One, managed by Michael Kaufman, holds the largest position in Skyline Champion Corporation (NYSE:SKY). MAK Capital One has a $82 million position in the stock, comprising 41.8% of its 13F portfolio. Coming in second is Phill Gross and Robert Atchinson of Adage Capital Management, with a $29.4 million position; 0.1% of its 13F portfolio is allocated to the company. Some other peers with similar optimism encompass Ken Grossman and Glen Schneider’s SG Capital Management, Chuck Royce’s Royce & Associates and Richard Driehaus’s Driehaus Capital. In terms of the portfolio weights assigned to each position MAK Capital One allocated the biggest weight to Skyline Champion Corporation (NYSE:SKY), around 41.82% of its 13F portfolio. Venator Capital Management is also relatively very bullish on the stock, dishing out 3.04 percent of its 13F equity portfolio to SKY.
Because Skyline Champion Corporation (NYSE:SKY) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of funds that decided to sell off their positions entirely by the end of the second quarter. At the top of the heap, Noah Levy and Eugene Dozortsev’s Newtyn Management dropped the biggest investment of the 750 funds watched by Insider Monkey, totaling about $9.4 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also dropped its stock, about $0.7 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Skyline Champion Corporation (NYSE:SKY) but similarly valued. We will take a look at Methanex Corporation (NASDAQ:MEOH), GreenTree Hospitality Group Ltd. (NYSE:GHG), James River Group Holdings Ltd (NASDAQ:JRVR), Tricida, Inc. (NASDAQ:TCDA), Axonics Modulation Technologies, Inc. (NASDAQ:AXNX), Regenxbio Inc (NASDAQ:RGNX), and MacroGenics Inc (NASDAQ:MGNX). This group of stocks’ market values resemble SKY’s market value.
|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 18 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $206 million in SKY’s case. Axonics Modulation Technologies, Inc. (NASDAQ:AXNX) is the most popular stock in this table. On the other hand GreenTree Hospitality Group Ltd. (NYSE:GHG) is the least popular one with only 5 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 overall hedge fund sentiment score for SKY is 73.4. 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. 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 still beat the market by 19.3 percentage points. Hedge funds were also right about betting on SKY, though not to the same extent, as the stock returned 10% in Q3 and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.