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Hedge Fund Consensus Stocks vs. Skechers USA Inc (SKX) In 2019

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds’ top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. That’s a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Skechers USA Inc (NYSE:SKX) was in 26 hedge funds’ portfolios at the end of the third quarter of 2019. SKX investors should be aware of an increase in support from the world’s most elite money managers of late. There were 23 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 Q3 rankings and see the video at the end of this article for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind we’re going to take a glance at the key hedge fund action encompassing Skechers USA Inc (NYSE:SKX).

What have hedge funds been doing with Skechers USA Inc (NYSE:SKX)?

Heading into the fourth quarter of 2019, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards SKX over the last 17 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 SKX A Good Stock To Buy?

The largest stake in Skechers USA Inc (NYSE:SKX) was held by AQR Capital Management, which reported holding $159.5 million worth of stock at the end of September. It was followed by Tremblant Capital with a $98.3 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and Marshall Wace. In terms of the portfolio weights assigned to each position Tremblant Capital allocated the biggest weight to Skechers USA Inc (NYSE:SKX), around 5.65% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, setting aside 5.08 percent of its 13F equity portfolio to SKX.

As aggregate interest increased, specific money managers have jumped into Skechers USA Inc (NYSE:SKX) headfirst. Renaissance Technologies, initiated the largest position in Skechers USA Inc (NYSE:SKX). Renaissance Technologies had $53 million invested in the company at the end of the quarter. David Keidan’s Buckingham Capital Management also initiated a $3.9 million position during the quarter. The following funds were also among the new SKX investors: Alexander Mitchell’s Scopus Asset Management, Paul Tudor Jones’s Tudor Investment Corp, and Steve Cohen’s Point72 Asset Management.

Let’s go over hedge fund activity in other stocks similar to Skechers USA Inc (NYSE:SKX). We will take a look at TCF Financial Corporation (NYSE:TCF), GDS Holdings Limited (NASDAQ:GDS), Sonoco Products Company (NYSE:SON), and CDK Global Inc (NASDAQ:CDK). All of these stocks’ market caps resemble SKX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TCF 28 359418 8
GDS 30 1126926 2
SON 20 117152 1
CDK 28 473046 -1
Average 26.5 519136 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.5 hedge funds with bullish positions and the average amount invested in these stocks was $519 million. That figure was $521 million in SKX’s case. GDS Holdings Limited (NASDAQ:GDS) is the most popular stock in this table. On the other hand Sonoco Products Company (NYSE:SON) is the least popular one with only 20 bullish hedge fund positions. Skechers USA Inc (NYSE:SKX) is not the least popular stock in this group but hedge fund interest is still below average. 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. A small number of hedge funds were also right about betting on SKX as the stock returned 88.7% in 2019 and outclassed the market by an even larger margin.
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.

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