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Hedge Funds Cashing Out Of Hanesbrands Inc. (HBI)

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 Hanesbrands Inc. (NYSE:HBI).

Hanesbrands Inc. (NYSE:HBI) was in 36 hedge funds’ portfolios at the end of the first quarter of 2020. HBI investors should be aware of a decrease in hedge fund sentiment of late. There were 40 hedge funds in our database with HBI positions at the end of the previous quarter. Our calculations also showed that HBI 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 51 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

James Mitarotonda Barington Capital

James A. Mitarotonda of Barington Capital Group

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. With all of this in mind we’re going to take a gander at the new hedge fund action surrounding Hanesbrands Inc. (NYSE:HBI).

Hedge fund activity in Hanesbrands Inc. (NYSE:HBI)

Heading into the second quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in HBI over the last 18 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Among these funds, Diamond Hill Capital held the most valuable stake in Hanesbrands Inc. (NYSE:HBI), which was worth $163.9 million at the end of the third quarter. On the second spot was Lyrical Asset Management which amassed $106.9 million worth of shares. AQR Capital Management, Marshall Wace LLP, 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 Barington Capital Group allocated the biggest weight to Hanesbrands Inc. (NYSE:HBI), around 7.07% of its 13F portfolio. Lyrical Asset Management is also relatively very bullish on the stock, dishing out 2.63 percent of its 13F equity portfolio to HBI.

Due to the fact that Hanesbrands Inc. (NYSE:HBI) has witnessed bearish sentiment from the smart money, logic holds that there exists a select few fund managers that slashed their entire stakes heading into Q4. It’s worth mentioning that Kerr Neilson’s Platinum Asset Management sold off the biggest position of all the hedgies monitored by Insider Monkey, valued at an estimated $11.8 million in stock. Brandon Haley’s fund, Holocene Advisors, also dumped its stock, about $5.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Hanesbrands Inc. (NYSE:HBI). We will take a look at RBC Bearings Incorporated (NASDAQ:ROLL), Physicians Realty Trust (NYSE:DOC), Nextera Energy Partners LP (NYSE:NEP), and Agree Realty Corporation (NYSE:ADC). All of these stocks’ market caps are closest to HBI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ROLL 9 39699 -1
DOC 16 133862 5
NEP 21 96521 4
ADC 21 310469 3
Average 16.75 145138 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $365 million in HBI’s case. Nextera Energy Partners LP (NYSE:NEP) is the most popular stock in this table. On the other hand RBC Bearings Incorporated (NASDAQ:ROLL) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Hanesbrands Inc. (NYSE:HBI) 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 8.3% in 2020 through the end of May but still managed to beat the market by 13.2 percentage points. Hedge funds were also right about betting on HBI as the stock returned 27.5% so far in Q2 (through the end of May) 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.