We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s take a look at whether Urban Outfitters, Inc. (NASDAQ:URBN) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Urban Outfitters, Inc. (NASDAQ:URBN) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as The Simply Good Foods Company (NASDAQ:SMPL), Proto Labs Inc (NYSE:PRLB), and SITE Centers Corp. (NYSE:SITC) to gather more data points. Our calculations also showed that URBN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
If you’d ask most shareholders, hedge funds are seen as worthless, old investment vehicles of yesteryear. While there are more than 8000 funds trading today, Our researchers hone in on the moguls of this club, about 850 funds. These money managers preside over the lion’s share of the hedge fund industry’s total capital, and by following their best picks, Insider Monkey has unearthed a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the key hedge fund action surrounding Urban Outfitters, Inc. (NASDAQ:URBN).
What does smart money think about Urban Outfitters, Inc. (NASDAQ:URBN)?
At Q4’s end, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards URBN over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in Urban Outfitters, Inc. (NASDAQ:URBN), worth close to $33.2 million, comprising less than 0.1%% of its total 13F portfolio. On Citadel Investment Group’s heels is Millennium Management, led by Israel Englander, holding a $27.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism comprise Cliff Asness’s AQR Capital Management, Brandon Haley’s Holocene Advisors and Mark Coe’s Intrinsic Edge Capital. In terms of the portfolio weights assigned to each position MIK Capital allocated the biggest weight to Urban Outfitters, Inc. (NASDAQ:URBN), around 1.26% of its 13F portfolio. Skylands Capital is also relatively very bullish on the stock, earmarking 1.19 percent of its 13F equity portfolio to URBN.
Judging by the fact that Urban Outfitters, Inc. (NASDAQ:URBN) has faced falling interest from hedge fund managers, we can see that there exists a select few fund managers that slashed their full holdings in the third quarter. It’s worth mentioning that Jorge Paulo Lemann’s 3G Capital dumped the biggest investment of all the hedgies followed by Insider Monkey, totaling an estimated $44 million in stock. Ray Dalio’s fund, Bridgewater Associates, also dumped its stock, about $16.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Urban Outfitters, Inc. (NASDAQ:URBN) but similarly valued. These stocks are The Simply Good Foods Company (NASDAQ:SMPL), Proto Labs Inc (NYSE:PRLB), SITE Centers Corp. (NYSE:SITC), and Trinity Industries, Inc. (NYSE:TRN). This group of stocks’ market caps are similar to URBN’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $312 million. That figure was $171 million in URBN’s case. The Simply Good Foods Company (NASDAQ:SMPL) is the most popular stock in this table. On the other hand Proto Labs Inc (NYSE:PRLB) is the least popular one with only 10 bullish hedge fund positions. Urban Outfitters, Inc. (NASDAQ:URBN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately URBN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on URBN were disappointed as the stock returned -42.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.