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 Fossil Group Inc (NASDAQ:FOSL).
Fossil Group Inc (NASDAQ:FOSL) has experienced a decrease in hedge fund sentiment of late. FOSL was in 9 hedge funds’ portfolios at the end of the first quarter of 2020. There were 14 hedge funds in our database with FOSL holdings at the end of the previous quarter. Our calculations also showed that FOSL 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to review the key hedge fund action regarding Fossil Group Inc (NASDAQ:FOSL).
How are hedge funds trading Fossil Group Inc (NASDAQ:FOSL)?
At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -36% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in FOSL over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, Contrarius Investment Management was the largest shareholder of Fossil Group Inc (NASDAQ:FOSL), with a stake worth $15.8 million reported as of the end of September. Trailing Contrarius Investment Management was D E Shaw, which amassed a stake valued at $3.5 million. Renaissance Technologies, Maverick Capital, and Citadel Investment Group 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 Contrarius Investment Management allocated the biggest weight to Fossil Group Inc (NASDAQ:FOSL), around 2.03% of its 13F portfolio. Maverick Capital is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to FOSL.
Since Fossil Group Inc (NASDAQ:FOSL) has experienced a decline in interest from hedge fund managers, it’s easy to see that there exists a select few funds who sold off their entire stakes in the first quarter. It’s worth mentioning that Matt Sirovich and Jeremy Mindich’s Scopia Capital sold off the largest position of the 750 funds tracked by Insider Monkey, comprising close to $3 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund cut about $2.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 5 funds in the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Fossil Group Inc (NASDAQ:FOSL). These stocks are Smith Micro Software, Inc. (NASDAQ:SMSI), Central Valley Community Bancorp (NASDAQ:CVCY), Kezar Life Sciences, Inc. (NASDAQ:KZR), and Digimarc Corp (NASDAQ:DMRC). This group of stocks’ market caps are closest to FOSL’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $22 million in FOSL’s case. Smith Micro Software, Inc. (NASDAQ:SMSI) is the most popular stock in this table. On the other hand Central Valley Community Bancorp (NASDAQ:CVCY) is the least popular one with only 5 bullish hedge fund positions. Fossil Group Inc (NASDAQ:FOSL) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on FOSL as the stock returned 46.2% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.