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Hedge Funds Are Selling Abercrombie & Fitch Co. (ANF)

In this article you are going to find out whether hedge funds think Abercrombie & Fitch Co. (NYSE:ANF) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Abercrombie & Fitch Co. (NYSE:ANF) has seen a decrease in hedge fund interest in recent months. ANF was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. There were 26 hedge funds in our database with ANF holdings at the end of the previous quarter. Our calculations also showed that ANF 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the fresh hedge fund action surrounding Abercrombie & Fitch Co. (NYSE:ANF).

What have hedge funds been doing with Abercrombie & Fitch Co. (NYSE:ANF)?

At Q1’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. By comparison, 25 hedge funds held shares or bullish call options in ANF a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Abercrombie & Fitch Co. (NYSE:ANF) was held by Contrarius Investment Management, which reported holding $37.3 million worth of stock at the end of September. It was followed by Prentice Capital Management with a $33.4 million position. Other investors bullish on the company included Paradice Investment Management, Citadel Investment Group, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Prentice Capital Management allocated the biggest weight to Abercrombie & Fitch Co. (NYSE:ANF), around 15.85% of its 13F portfolio. Contrarius Investment Management is also relatively very bullish on the stock, earmarking 4.77 percent of its 13F equity portfolio to ANF.

Due to the fact that Abercrombie & Fitch Co. (NYSE:ANF) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers who sold off their positions entirely heading into Q4. At the top of the heap, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors dumped the largest position of the 750 funds monitored by Insider Monkey, comprising about $17 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $11.2 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Abercrombie & Fitch Co. (NYSE:ANF) but similarly valued. These stocks are SilverCrest Metals Inc. (NYSE:SILV), Repay Holdings Corporation (NASDAQ:RPAY), The York Water Company (NASDAQ:YORW), and Sonic Automotive Inc (NYSE:SAH). This group of stocks’ market caps are closest to ANF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SILV 9 34421 -2
RPAY 8 112989 -4
YORW 11 25816 3
SAH 14 17995 -2
Average 10.5 47805 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $163 million in ANF’s case. Sonic Automotive Inc (NYSE:SAH) is the most popular stock in this table. On the other hand Repay Holdings Corporation (NASDAQ:RPAY) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Abercrombie & Fitch Co. (NYSE:ANF) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on ANF as the stock returned 34.4% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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