In this article we are going to use hedge fund sentiment as a tool and determine whether Carter’s, Inc. (NYSE:CRI) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Carter’s, Inc. (NYSE:CRI) investors should pay attention to an increase in activity from the world’s largest hedge funds recently. Carter’s, Inc. (NYSE:CRI) was in 27 hedge funds’ portfolios at the end of March. The all time high for this statistic is 46. There were 25 hedge funds in our database with CRI positions at the end of the fourth quarter. Our calculations also showed that CRI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a gander at the key hedge fund action regarding Carter’s, Inc. (NYSE:CRI).
Do Hedge Funds Think CRI Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in CRI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Carter’s, Inc. (NYSE:CRI), with a stake worth $54.2 million reported as of the end of March. Trailing AQR Capital Management was Polaris Capital Management, which amassed a stake valued at $49.1 million. Diamond Hill Capital, Arrowstreet Capital, and Renaissance Technologies 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 Polaris Capital Management allocated the biggest weight to Carter’s, Inc. (NYSE:CRI), around 1.61% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, designating 0.69 percent of its 13F equity portfolio to CRI.
As industrywide interest jumped, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in Carter’s, Inc. (NYSE:CRI). Balyasny Asset Management had $15.9 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $4.4 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer’s PEAK6 Capital Management, Jinghua Yan’s TwinBeech Capital, and Lee Ainslie’s Maverick Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Carter’s, Inc. (NYSE:CRI) but similarly valued. We will take a look at Hayward Holdings, Inc. (NYSE:HAYW), Envestnet Inc (NYSE:ENV), Tilray, Inc. (NASDAQ:TLRY), Murphy USA Inc. (NYSE:MUSA), SeaWorld Entertainment Inc (NYSE:SEAS), Millicom International Cellular S.A. (NASDAQ:TIGO), and Progyny, Inc. (NASDAQ:PGNY). This group of stocks’ market values are similar to CRI’s market value.
|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 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $441 million. That figure was $265 million in CRI’s case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 5 bullish hedge fund positions. Carter’s, Inc. (NYSE:CRI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CRI is 57. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. Hedge funds were also right about betting on CRI, though not to the same extent, as the stock returned 17.9% since Q1 (through July 9th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.