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Hedge Funds Are Buying Carter’s, Inc. (CRI)

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 Carter’s, Inc. (NYSE:CRI).

Carter’s, Inc. (NYSE:CRI) investors should be aware of an increase in support from the world’s most elite money managers of late. Our calculations also showed that CRI 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 eyes of most market participants, hedge funds are assumed to be unimportant, old financial tools of the past. While there are over 8000 funds trading at present, We choose to focus on the leaders of this group, about 850 funds. It is estimated that this group of investors watch over most of all hedge funds’ total asset base, and by observing their matchless picks, Insider Monkey has brought to light a few investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

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 trades like this one. 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 glance at the recent hedge fund action surrounding Carter’s, Inc. (NYSE:CRI).

How are hedge funds trading Carter’s, Inc. (NYSE:CRI)?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CRI over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Ric Dillon’s Diamond Hill Capital has the largest position in Carter’s, Inc. (NYSE:CRI), worth close to $29.5 million, amounting to 0.2% of its total 13F portfolio. The second most bullish fund manager is AQR Capital Management, managed by Cliff Asness, which holds a $29.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish encompass Bernard Horn’s Polaris Capital Management, Ken Griffin’s Citadel Investment Group and Steven Boyd’s Armistice Capital. In terms of the portfolio weights assigned to each position Polaris Capital Management allocated the biggest weight to Carter’s, Inc. (NYSE:CRI), around 1.67% of its 13F portfolio. Manatuck Hill Partners is also relatively very bullish on the stock, dishing out 0.9 percent of its 13F equity portfolio to CRI.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. Armistice Capital, managed by Steven Boyd, established the most valuable position in Carter’s, Inc. (NYSE:CRI). Armistice Capital had $14.1 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors also initiated a $4.5 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Mike Vranos’s Ellington, and Brandon Haley’s Holocene Advisors.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Carter’s, Inc. (NYSE:CRI) but similarly valued. These stocks are The Descartes Systems Group Inc (NASDAQ:DSGX), NeoGenomics, Inc. (NASDAQ:NEO), Virgin Galactic Holdings, Inc. (NYSE:SPCE), and Hess Midstream LP (NYSE:HESM). This group of stocks’ market valuations match CRI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DSGX 10 103626 -2
NEO 11 51026 -1
SPCE 12 55139 -20
HESM 5 5430 -4
Average 9.5 53805 -6.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $150 million in CRI’s case. Virgin Galactic Holdings, Inc. (NYSE:SPCE) is the most popular stock in this table. On the other hand Hess Midstream LP (NYSE:HESM) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Carter’s, Inc. (NYSE:CRI) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on CRI as the stock returned 33.3% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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