We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Movado Group, Inc (NYSE:MOV) and determine whether hedge funds skillfully traded this stock.
Is Movado Group, Inc (NYSE:MOV) an exceptional investment now? The smart money was turning bullish. The number of bullish hedge fund positions inched up by 5 in recent months. Movado Group, Inc (NYSE:MOV) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 26. Our calculations also showed that MOV 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). There were 13 hedge funds in our database with MOV positions at the end of the first quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by 58 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.
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. With all of this in mind let’s view the latest hedge fund action surrounding Movado Group, Inc (NYSE:MOV).
Hedge fund activity in Movado Group, Inc (NYSE:MOV)
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MOV over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Contrarius Investment Management was the largest shareholder of Movado Group, Inc (NYSE:MOV), with a stake worth $4.9 million reported as of the end of September. Trailing Contrarius Investment Management was Arrowstreet Capital, which amassed a stake valued at $2.4 million. GAMCO Investors, Ariel Investments, and D E Shaw 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 AWH Capital allocated the biggest weight to Movado Group, Inc (NYSE:MOV), around 1.27% of its 13F portfolio. Contrarius Investment Management is also relatively very bullish on the stock, setting aside 0.46 percent of its 13F equity portfolio to MOV.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. AWH Capital, managed by Austin Wiggins Hopper, assembled the largest position in Movado Group, Inc (NYSE:MOV). AWH Capital had $0.7 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.3 million investment in the stock during the quarter. The other funds with brand new MOV positions are Donald Sussman’s Paloma Partners, Bruce Kovner’s Caxton Associates LP, and Michael Gelband’s ExodusPoint Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Movado Group, Inc (NYSE:MOV) but similarly valued. These stocks are Fly Leasing Ltd (NYSE:FLY), Golden Entertainment Inc (NASDAQ:GDEN), Spark Energy, Inc. (NASDAQ:SPKE), America First Multifamily Investors, L.P. (NASDAQ:ATAX), Preformed Line Products Company (NASDAQ:PLPC), Selecta Biosciences, Inc. (NASDAQ:SELB), and Leju Holdings Ltd (NYSE:LEJU). All of these stocks’ market caps are closest to MOV’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $16 million in MOV’s case. Selecta Biosciences, Inc. (NASDAQ:SELB) is the most popular stock in this table. On the other hand America First Multifamily Investors, L.P. (NASDAQ:ATAX) is the least popular one with only 2 bullish hedge fund positions. Movado Group, Inc (NYSE:MOV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MOV is 77.8. 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 positive signal but 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 beat the market by 19.3 percentage points. Unfortunately MOV wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MOV were disappointed as the stock returned -8.3% in Q3 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.