Hedge Funds Cashed Out Of Canada Goose Holdings Inc. (GOOS)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Canada Goose Holdings Inc. (NYSE:GOOS) and determine whether hedge funds had an edge regarding this stock.

Is Canada Goose Holdings Inc. (NYSE:GOOS) a buy here? Money managers were turning less bullish. The number of bullish hedge fund positions shrunk by 6 lately. Canada Goose Holdings Inc. (NYSE:GOOS) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistics is 29. Our calculations also showed that GOOS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 26 hedge funds in our database with GOOS holdings at the end of March.

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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Bill Miller

Bill Miller of Miller Value Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to analyze the key hedge fund action surrounding Canada Goose Holdings Inc. (NYSE:GOOS).

How have hedgies been trading Canada Goose Holdings Inc. (NYSE:GOOS)?

At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in GOOS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Canada Goose Holdings Inc. (NYSE:GOOS), which was worth $35.2 million at the end of the third quarter. On the second spot was Miller Value Partners which amassed $23.2 million worth of shares. Tiger Pacific Capital, Ancient Art (Teton 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 Tiger Pacific Capital allocated the biggest weight to Canada Goose Holdings Inc. (NYSE:GOOS), around 4.79% of its 13F portfolio. Ancient Art (Teton Capital) is also relatively very bullish on the stock, setting aside 2.36 percent of its 13F equity portfolio to GOOS.

Because Canada Goose Holdings Inc. (NYSE:GOOS) has witnessed bearish sentiment from the aggregate hedge fund industry, we can see that there is a sect of funds that decided to sell off their positions entirely by the end of the second quarter. Interestingly, Robert Joseph Caruso’s Select Equity Group said goodbye to the largest position of the 750 funds tracked by Insider Monkey, valued at about $72.8 million in stock, and Andreas Halvorsen’s Viking Global was right behind this move, as the fund dropped about $27.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Canada Goose Holdings Inc. (NYSE:GOOS). We will take a look at PotlatchDeltic Corporation (NASDAQ:PCH), Taro Pharmaceutical Industries Ltd. (NYSE:TARO), Benitec Biopharma Inc. (NASDAQ:BNTC), Home Bancshares, Inc. (Conway, AR) (NASDAQ:HOMB), CVB Financial Corp. (NASDAQ:CVBF), Merit Medical Systems, Inc. (NASDAQ:MMSI), and Spirit AeroSystems Holdings, Inc. (NYSE:SPR). This group of stocks’ market caps are closest to GOOS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PCH 22 278277 6
TARO 10 72222 1
BNTC 1 94 0
HOMB 14 30035 -6
CVBF 14 34930 6
MMSI 16 268848 5
SPR 37 663451 -1
Average 16.3 192551 1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $137 million in GOOS’s case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand Benitec Biopharma Inc. (NASDAQ:BNTC) is the least popular one with only 1 bullish hedge fund positions. Canada Goose Holdings Inc. (NYSE:GOOS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GOOS is 19.7. 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 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 24.8% in 2020 through the end of third quarter and still beat the market by 19.3 percentage points. Hedge funds were also right about betting on GOOS as the stock returned 38.8% during Q3 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.