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Hedge Funds Have Never Been This Bullish On Abercrombie & Fitch Co. (ANF)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Abercrombie & Fitch Co. (NYSE:ANF) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Abercrombie & Fitch Co. (NYSE:ANF) was in 34 hedge funds’ portfolios at the end of June. The all time high for this statistics is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ANF has seen an increase in hedge fund interest in recent months. There were 23 hedge funds in our database with ANF positions at the end of the first quarter. Our calculations also showed that ANF 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most investors, hedge funds are viewed as slow, outdated financial tools of years past. While there are greater than 8000 funds trading today, Our experts choose to focus on the leaders of this club, around 850 funds. Most estimates calculate that this group of people orchestrate bulk of all hedge funds’ total capital, and by keeping an eye on their matchless stock picks, Insider Monkey has discovered a few investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let’s view the key hedge fund action regarding Abercrombie & Fitch Co. (NYSE:ANF).

How are hedge funds trading Abercrombie & Fitch Co. (NYSE:ANF)?

At second quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 48% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in ANF a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is ANF A Good Stock To Buy?

More specifically, Prentice Capital Management was the largest shareholder of Abercrombie & Fitch Co. (NYSE:ANF), with a stake worth $40.4 million reported as of the end of September. Trailing Prentice Capital Management was Paradice Investment Management, which amassed a stake valued at $31.3 million. Rima Senvest Management, Arrowstreet Capital, and Divisar Capital 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 Prentice Capital Management allocated the biggest weight to Abercrombie & Fitch Co. (NYSE:ANF), around 14.92% of its 13F portfolio. Divisar Capital is also relatively very bullish on the stock, designating 4.22 percent of its 13F equity portfolio to ANF.

As one would reasonably expect, key hedge funds have been driving this bullishness. Rima Senvest Management, managed by Richard Mashaal, established the most valuable position in Abercrombie & Fitch Co. (NYSE:ANF). Rima Senvest Management had $16.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $7.7 million position during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Greg Eisner’s Engineers Gate Manager, and Steve Cohen’s Point72 Asset Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Abercrombie & Fitch Co. (NYSE:ANF) but similarly valued. These stocks are RPC, Inc. (NYSE:RES), NV5 Global Inc (NASDAQ:NVEE), Northern Dynasty Minerals Ltd. (NYSE:NAK), Meredith Corporation (NYSE:MDP), Pampa Energia S.A. (NYSE:PAM), TPG RE Finance Trust, Inc. (NYSE:TRTX), and IMAX Corporation (NYSE:IMAX). This group of stocks’ market valuations are closest to ANF’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RES 16 27399 5
NVEE 7 11276 -2
NAK 10 23661 5
MDP 20 174786 4
PAM 10 33729 3
TRTX 14 81771 -3
IMAX 19 64964 2
Average 13.7 59655 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.7 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $185 million in ANF’s case. Meredith Corporation (NYSE:MDP) is the most popular stock in this table. On the other hand NV5 Global Inc (NASDAQ:NVEE) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Abercrombie & Fitch Co. (NYSE:ANF) is more popular among hedge funds. Our overall hedge fund sentiment score for ANF is 90. 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 returned 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on ANF as the stock returned 22.3% since the end of June 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.