Gildan Activewear Inc (GIL): Are Hedge Funds Right About This Stock?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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 Gildan Activewear Inc (NYSE:GIL).

Gildan Activewear Inc (NYSE:GIL) investors should pay attention to an increase in hedge fund interest recently. GIL was in 22 hedge funds’ portfolios at the end of December. There were 20 hedge funds in our database with GIL positions at the end of the previous quarter. Our calculations also showed that GIL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a gander at the recent hedge fund action regarding Gildan Activewear Inc (NYSE:GIL).

What does smart money think about Gildan Activewear Inc (NYSE:GIL)?

At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in GIL a year ago. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

More specifically, Pzena Investment Management was the largest shareholder of Gildan Activewear Inc (NYSE:GIL), with a stake worth $250.7 million reported as of the end of September. Trailing Pzena Investment Management was Arrowstreet Capital, which amassed a stake valued at $43.1 million. Citadel Investment Group, Bayberry Capital Partners, and MD Sass 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 Bayberry Capital Partners allocated the biggest weight to Gildan Activewear Inc (NYSE:GIL), around 8.34% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, dishing out 4.29 percent of its 13F equity portfolio to GIL.

Consequently, specific money managers have jumped into Gildan Activewear Inc (NYSE:GIL) headfirst. Bayberry Capital Partners, managed by Angela Aldrich, established the most outsized position in Gildan Activewear Inc (NYSE:GIL). Bayberry Capital Partners had $18 million invested in the company at the end of the quarter. Joseph Sirdevan’s Galibier Capital Management also initiated a $13.5 million position during the quarter. The following funds were also among the new GIL investors: William Hyatt’s Hudson Way Capital Management, Richard Mashaal’s Rima Senvest Management, and Israel Englander’s Millennium Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Gildan Activewear Inc (NYSE:GIL) but similarly valued. We will take a look at Companhia Brasileira de Distribuicao (NYSE:CBD), Globus Medical Inc (NYSE:GMED), Casey’s General Stores, Inc. (NASDAQ:CASY), and Western Alliance Bancorporation (NYSE:WAL). All of these stocks’ market caps resemble GIL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CBD 9 45263 -2
GMED 29 256883 5
CASY 22 142114 4
WAL 32 246148 3
Average 23 172602 2.5

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 $173 million. That figure was $430 million in GIL’s case. Western Alliance Bancorporation (NYSE:WAL) is the most popular stock in this table. On the other hand Companhia Brasileira de Distribuicao (NYSE:CBD) is the least popular one with only 9 bullish hedge fund positions. Gildan Activewear Inc (NYSE:GIL) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately GIL wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); GIL investors were disappointed as the stock returned -58.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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