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Hedge Funds Aren’t Crazy About Abercrombie & Fitch Co. (ANF) Anymore

Is Abercrombie & Fitch Co. (NYSE:ANF) a marvelous investment right now? The smart money is taking a pessimistic view. The number of bullish hedge fund bets retreated by 4 in recent months.

If you’d ask most shareholders, hedge funds are perceived as underperforming, old financial vehicles of years past. While there are greater than 8000 funds with their doors open at present, we choose to focus on the moguls of this group, close to 450 funds. It is estimated that this group controls the majority of all hedge funds’ total asset base, and by tracking their best equity investments, we have unearthed a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Abercrombie & Fitch Co. (NYSE:ANF)Just as integral, optimistic insider trading activity is a second way to break down the stock market universe. There are many incentives for a corporate insider to cut shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several academic studies have demonstrated the market-beating potential of this strategy if piggybackers know what to do (learn more here).

With all of this in mind, it’s important to take a look at the key action surrounding Abercrombie & Fitch Co. (NYSE:ANF).

How have hedgies been trading Abercrombie & Fitch Co. (NYSE:ANF)?

At the end of the first quarter, a total of 33 of the hedge funds we track were long in this stock, a change of -11% from the first quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully.

According to our comprehensive database, SAC Capital Advisors, managed by Steven Cohen, holds the most valuable position in Abercrombie & Fitch Co. (NYSE:ANF). SAC Capital Advisors has a $105 million position in the stock, comprising 0.5% of its 13F portfolio. On SAC Capital Advisors’s heels is Ken Griffin of Citadel Investment Group, with a $92.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish include Phill Gross and Robert Atchinson’s Adage Capital Management, Sean Cullinan’s Point State Capital and David Keidan’s Buckingham Capital Management.

Judging by the fact that Abercrombie & Fitch Co. (NYSE:ANF) has experienced falling interest from the smart money, logic holds that there is a sect of money managers who were dropping their entire stakes in Q1. It’s worth mentioning that Bruce Kovner’s Caxton Associates LP sold off the biggest stake of the “upper crust” of funds we key on, valued at an estimated $48 million in call options. Paul Tudor Jones’s fund, Tudor Investment Corp, also cut its stock, about $33.6 million worth. These transactions are important to note, as total hedge fund interest fell by 4 funds in Q1.

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

Insider trading activity, especially when it’s bullish, is best served when the company in question has seen transactions within the past six months. Over the last six-month time frame, Abercrombie & Fitch Co. (NYSE:ANF) has seen zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Abercrombie & Fitch Co. (NYSE:ANF). These stocks are Foot Locker, Inc. (NYSE:FL), Chico’s FAS, Inc. (NYSE:CHS), DSW Inc. (NYSE:DSW), Ascena Retail Group Inc (NASDAQ:ASNA), and American Eagle Outfitters (NYSE:AEO). All of these stocks are in the apparel stores industry and their market caps match ANF’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Foot Locker, Inc. (NYSE:FL) 31 0 4
Chico’s FAS, Inc. (NYSE:CHS) 27 0 9
DSW Inc. (NYSE:DSW) 15 0 9
Ascena Retail Group Inc (NASDAQ:ASNA) 24 0 4
American Eagle Outfitters (NYSE:AEO) 23 0 6

With the results shown by our tactics, everyday investors must always monitor hedge fund and insider trading sentiment, and Abercrombie & Fitch Co. (NYSE:ANF) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds

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