The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded The Gap Inc. (NYSE:GPS) based on those filings.
The Gap Inc. (NYSE:GPS) investors should be aware of an increase in activity from the world’s largest hedge funds recently. The Gap Inc. (NYSE:GPS) was in 42 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 38. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that GPS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 homepage. Keeping this in mind let’s analyze the recent hedge fund action surrounding The Gap Inc. (NYSE:GPS).
Do Hedge Funds Think GPS Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in GPS 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.
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the number one position in The Gap Inc. (NYSE:GPS). Arrowstreet Capital has a $169 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $142.1 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Alexander Mitchell’s Scopus Asset Management, D. E. Shaw’s D E Shaw and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Kehrs Ridge Capital allocated the biggest weight to The Gap Inc. (NYSE:GPS), around 3.1% of its 13F portfolio. Franklin Street Capital is also relatively very bullish on the stock, setting aside 2.19 percent of its 13F equity portfolio to GPS.
As one would reasonably expect, key money managers have been driving this bullishness. Melvin Capital Management, managed by Gabriel Plotkin, initiated the largest position in The Gap Inc. (NYSE:GPS). Melvin Capital Management had $53.6 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $26.7 million investment in the stock during the quarter. The following funds were also among the new GPS investors: James Crichton’s Hitchwood Capital Management, Steven Boyd’s Armistice Capital, and Jeffrey Hoffner’s Engle Capital.
Let’s now take a look at hedge fund activity in other stocks similar to The Gap Inc. (NYSE:GPS). We will take a look at Universal Display Corporation (NASDAQ:OLED), Playtika Holding Corp. (NASDAQ:PLTK), The Toro Company (NYSE:TTC), Booz Allen Hamilton Holding Corporation (NYSE:BAH), BorgWarner Inc. (NYSE:BWA), Zynga Inc (NASDAQ:ZNGA), and Dropbox, Inc. (NASDAQ:DBX). All of these stocks’ market caps match GPS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OLED | 17 | 95398 | -7 |
| PLTK | 21 | 444574 | 21 |
| TTC | 32 | 1016572 | 1 |
| BAH | 29 | 178958 | 2 |
| BWA | 27 | 590548 | 0 |
| ZNGA | 47 | 1143096 | -5 |
| DBX | 31 | 775813 | -12 |
| Average | 29.1 | 606423 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $606 million. That figure was $989 million in GPS’s case. Zynga Inc (NASDAQ:ZNGA) is the most popular stock in this table. On the other hand Universal Display Corporation (NASDAQ:OLED) is the least popular one with only 17 bullish hedge fund positions. The Gap Inc. (NYSE:GPS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GPS is 80.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on GPS, though not to the same extent, as the stock returned 5.9% since Q1 (through June 18th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
