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Hedge Funds Started Buying Carter’s, Inc. (CRI) Again

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Carter’s, Inc. (NYSE:CRI) from the perspective of those elite funds.

Carter’s, Inc. (NYSE:CRI) was in 25 hedge funds’ portfolios at the end of the second quarter of 2019. CRI has experienced an increase in enthusiasm from smart money recently. There were 19 hedge funds in our database with CRI positions at the end of the previous quarter. Our calculations also showed that CRI isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

CRI_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the new hedge fund action encompassing Carter’s, Inc. (NYSE:CRI).

How are hedge funds trading Carter’s, Inc. (NYSE:CRI)?

At Q2’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 32% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in CRI over the last 16 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Ric Dillon Diamond Hill Capital

When looking at the institutional investors followed by Insider Monkey, Valinor Management LLC, managed by David Gallo, holds the biggest position in Carter’s, Inc. (NYSE:CRI). Valinor Management LLC has a $53.6 million position in the stock, comprising 3.2% of its 13F portfolio. The second largest stake is held by Ric Dillon of Diamond Hill Capital, with a $44.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions contain Bernard Horn’s Polaris Capital Management, Cliff Asness’s AQR Capital Management and Dmitry Balyasny’s Balyasny Asset Management.

As one would reasonably expect, key money managers have jumped into Carter’s, Inc. (NYSE:CRI) headfirst. Chilton Investment Company, managed by Richard Chilton, established the biggest position in Carter’s, Inc. (NYSE:CRI). Chilton Investment Company had $2.5 million invested in the company at the end of the quarter. John Tompkins’s Tyvor Capital also made a $2.2 million investment in the stock during the quarter. The other funds with brand new CRI positions are Philippe Laffont’s Coatue Management, Brandon Haley’s Holocene Advisors, and Minhua Zhang’s Weld Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Carter’s, Inc. (NYSE:CRI) but similarly valued. These stocks are Murphy Oil Corporation (NYSE:MUR), Janus Henderson Group plc (NYSE:JHG), Brighthouse Financial, Inc. (NASDAQ:BHF), and Ardagh Group S.A. (NYSE:ARD). This group of stocks’ market caps resemble CRI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MUR 18 121679 -2
JHG 15 198482 3
BHF 23 417281 -8
ARD 11 72786 -1
Average 16.75 202557 -2

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 $203 million. That figure was $192 million in CRI’s case. Brighthouse Financial, Inc. (NASDAQ:BHF) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Carter’s, Inc. (NYSE:CRI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately CRI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CRI were disappointed as the stock returned -6% during the third quarter 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 in Q3.

Disclosure: None. This article was originally published at Insider Monkey.

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