Hedge Funds Are Coming Back To Stitch Fix, Inc. (SFIX)

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 Stitch Fix, Inc. (NASDAQ:SFIX) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Stitch Fix, Inc. (NASDAQ:SFIX) undervalued? The smart money was taking an optimistic view. The number of bullish hedge fund positions went up by 12 in recent months. Stitch Fix, Inc. (NASDAQ:SFIX) was in 28 hedge funds’ portfolios at the end of June. The all time high for this statistics is 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that SFIX 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 16 hedge funds in our database with SFIX holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Today there are tons of methods market participants have at their disposal to assess stocks. A pair of the most innovative methods are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can outperform the market by a solid amount (see the details here).

Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 take a look at the key hedge fund action surrounding Stitch Fix, Inc. (NASDAQ:SFIX).

What have hedge funds been doing with Stitch Fix, Inc. (NASDAQ:SFIX)?

At second quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 75% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in SFIX 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.

The largest stake in Stitch Fix, Inc. (NASDAQ:SFIX) was held by Miller Value Partners, which reported holding $65.7 million worth of stock at the end of September. It was followed by North Peak Capital with a $24.7 million position. Other investors bullish on the company included Coatue Management, Citadel Investment Group, and Citadel Investment Group. In terms of the portfolio weights assigned to each position North Peak Capital allocated the biggest weight to Stitch Fix, Inc. (NASDAQ:SFIX), around 5.45% of its 13F portfolio. Hidden Lake Asset Management is also relatively very bullish on the stock, earmarking 4.16 percent of its 13F equity portfolio to SFIX.

As aggregate interest increased, key hedge funds have jumped into Stitch Fix, Inc. (NASDAQ:SFIX) headfirst. North Peak Capital, managed by Michael Kahan and Jeremy Kahan, initiated the biggest position in Stitch Fix, Inc. (NASDAQ:SFIX). North Peak Capital had $24.7 million invested in the company at the end of the quarter. Quincy Lee’s Ancient Art (Teton Capital) also made a $14.1 million investment in the stock during the quarter. The other funds with brand new SFIX positions are Dmitry Balyasny’s Balyasny Asset Management, Kevin Mok’s Hidden Lake Asset Management, and Brad Gerstner’s Altimeter Capital Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Stitch Fix, Inc. (NASDAQ:SFIX) but similarly valued. We will take a look at Denali Therapeutics Inc. (NASDAQ:DNLI), Artisan Partners Asset Management Inc (NYSE:APAM), Tripadvisor Inc (NASDAQ:TRIP), Canada Goose Holdings Inc. (NYSE:GOOS), PotlatchDeltic Corporation (NASDAQ:PCH), Taro Pharmaceutical Industries Ltd. (NYSE:TARO), and Benitec Biopharma Inc. (NASDAQ:BNTC). All of these stocks’ market caps are similar to SFIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DNLI 21 99880 7
APAM 21 262058 1
TRIP 28 641358 -2
GOOS 20 136796 -6
PCH 22 278277 6
TARO 10 72222 1
BNTC 1 94 0
Average 17.6 212955 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $213 million. That figure was $219 million in SFIX’s case. Tripadvisor Inc (NASDAQ:TRIP) is the most popular stock in this table. On the other hand Benitec Biopharma Inc. (NASDAQ:BNTC) is the least popular one with only 1 bullish hedge fund positions. Stitch Fix, Inc. (NASDAQ:SFIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SFIX is 90. 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately SFIX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SFIX were disappointed as the stock returned 5.2% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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