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Hedge Funds Are Dumping Stitch Fix, Inc. (SFIX)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. In this article we look at what those investors think of Stitch Fix, Inc. (NASDAQ:SFIX).

Stitch Fix, Inc. (NASDAQ:SFIX) investors should be aware of a decrease in support from the world’s most elite money managers recently. SFIX was in 16 hedge funds’ portfolios at the end of the first quarter of 2020. There were 28 hedge funds in our database with SFIX holdings at the end of the previous quarter. Our calculations also showed that SFIX 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.

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 was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. 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. With all of this in mind we’re going to take a gander at the new hedge fund action encompassing Stitch Fix, Inc. (NASDAQ:SFIX).

Hedge fund activity in Stitch Fix, Inc. (NASDAQ:SFIX)

Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -43% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SFIX over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

Is SFIX A Good Stock To Buy?

The largest stake in Stitch Fix, Inc. (NASDAQ:SFIX) was held by Miller Value Partners, which reported holding $34.8 million worth of stock at the end of September. It was followed by Coatue Management with a $11.9 million position. Other investors bullish on the company included SCGE Management, Maverick Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Miller Value Partners allocated the biggest weight to Stitch Fix, Inc. (NASDAQ:SFIX), around 2.24% of its 13F portfolio. Potrero Capital Research is also relatively very bullish on the stock, dishing out 1.73 percent of its 13F equity portfolio to SFIX.

Due to the fact that Stitch Fix, Inc. (NASDAQ:SFIX) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few hedge funds that elected to cut their positions entirely by the end of the first quarter. Interestingly, Robert Pitts’s Steadfast Capital Management sold off the biggest investment of all the hedgies tracked by Insider Monkey, worth close to $58.2 million in stock, and Alexander Mitchell’s Scopus Asset Management was right behind this move, as the fund dumped about $37.8 million worth. These moves are interesting, as total hedge fund interest was cut by 12 funds by the end of the first quarter.

Let’s check out hedge fund activity in other stocks similar to Stitch Fix, Inc. (NASDAQ:SFIX). These stocks are Sunoco LP (NYSE:SUN), Yelp Inc (NYSE:YELP), Compass Minerals International, Inc. (NYSE:CMP), and ICF International Inc (NASDAQ:ICFI). All of these stocks’ market caps resemble SFIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SUN 4 7173 -2
YELP 25 235924 -2
CMP 16 82499 3
ICFI 10 26175 -1
Average 13.75 87943 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $80 million in SFIX’s case. Yelp Inc (NYSE:YELP) is the most popular stock in this table. On the other hand Sunoco LP (NYSE:SUN) is the least popular one with only 4 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 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 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on SFIX as the stock returned 82.8% in Q2 (through June 25th) 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.